[House Report 105-339]
[From the U.S. Government Publishing Office]



105th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                    105-339
_______________________________________________________________________


 
                     NO ELECTRONIC THEFT (NET) ACT

_______________________________________________________________________


October 23, 1997.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Coble, from the Committee on the Judiciary, submitted the following

                              R E P O R T

                        [To accompany H.R. 2265]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 2265) to amend the provisions of titles 17 and 18, 
United States Code, to provide greater copyright protection by 
amending criminal copyright infringement provisions, and for 
other purposes, having considered the same, reports favorably 
thereon with an amendment and recommends that the bill as 
amended do pass.

                           TABLE OF CONTENTS

                                                                   Page
The Amendment..............................................           1
Purpose and Summary........................................           3
Background and Need for Legislation........................           3
Hearing....................................................           5
Committee Consideration....................................           5
Committee Oversight Findings...............................           5
Committee on Government Reform and Oversight Findings......           5
New Budget Authority and Tax Expenditures..................           5
Congressional Budget Office Estimate.......................           6
Constitutional Authority Statement.........................           7
Section-by-Section Analysis and Discussion.................           7
Changes in Existing Law Made by the Bill, as Reported......          11

    The amendment is as follows:
    Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``No Electronic Theft (NET) Act''.

SEC. 2. CRIMINAL INFRINGEMENT OF COPYRIGHTS.

    (a) Definition of Financial Gain.--Section 101 of title 17, United 
States Code, is amended by inserting after the undesignated paragraph 
relating to the term ``display'', the following new paragraph:
            ``The term `financial gain' includes receipt, or 
        expectation of receipt, of anything of value, including the 
        receipt of other copyrighted works.''.
    (b) Criminal Offenses.--Section 506(a) of title 17, United States 
Code, is amended to read as follows:
    ``(a) Criminal Infringement.--Any person who infringes a copyright 
willfully either--
            ``(1) for purposes of commercial advantage or private 
        financial gain, or
            ``(2) 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,
shall be punished as provided under section 2319 of title 18.''.
    (c) Limitation on Criminal Proceedings.--Section 507(a) of title 
17, United States Code, is amended by striking ``three'' and inserting 
``5''.
    (d) Criminal Infringement of a Copyright.--Section 2319 of title 
18, United States Code, is amended--
            (1) in subsection (a), by striking ``subsection (b)'' and 
        inserting ``subsections (b) and (c)'';
            (2) in subsection (b)--
                    (A) in the matter preceding paragraph (1), by 
                striking ``subsection (a) of this section'' and 
                inserting ``section 506(a)(1) of title 17''; and
                    (B) in paragraph (1)--
                            (i) by inserting ``including by electronic 
                        means,'' after ``if the offense consists of the 
                        reproduction or distribution,''; and
                            (ii) by striking ``with a retail value of 
                        more than $2,500'' and inserting ``which have a 
                        total retail value of more than $2,500''; and
            (3) by redesignating subsection (c) as subsection (e) and 
        inserting after subsection (b) the following:
    ``(c) Any person who commits an offense under section 506(a)(2) of 
title 17--
            ``(1) shall be imprisoned not more than 3 years, or fined 
        in the amount set forth in this title, or both, if the offense 
        consists of the reproduction or distribution of 10 or more 
        copies or phonorecords of 1 or more copyrighted works, which 
        have a total retail value of $2,500 or more;
            ``(2) shall be imprisoned not more than 6 years, or fined 
        in the amount set forth in this title, or both, if the offense 
        is a second or subsequent offense under paragraph (1); and
            ``(3) shall be imprisoned not more than 1 year, or fined in 
        the amount set forth in this title, or both, if the offense 
        consists of the reproduction or distribution of 1 or more 
        copies or phonorecords of 1 or more copyrighted works, which 
        have a total retail value of more than $1,000.
    ``(d)(1) During preparation of the presentence report pursuant to 
Rule 32(c) of the Federal Rules of Criminal Procedure, victims of the 
offense shall be permitted to submit, and the probation officer shall 
receive, a victim impact statement that identifies the victim of the 
offense and the extent and scope of the injury and loss suffered by the 
victim, including the estimated economic impact of the offense on that 
victim.
    ``(2) Persons permitted to submit victim impact statements shall 
include--
            ``(A) producers and sellers of legitimate works affected by 
        conduct involved in the offense;
            ``(B) holders of intellectual property rights in such 
        works; and
            ``(C) the legal representatives of such producers, sellers, 
        and holders.''.
    (e) Unauthorized Fixation and Trafficking of Live Musical 
Performances.--Section 2319A of title 18, United States Code, is 
amended--
            (1) by redesignating subsections (d) and (e) as subsections 
        (e) and (f), respectively; and
            (2) by inserting after subsection (c) the following:
    ``(d) Victim Impact Statement.--(1) During preparation of the 
presentence report pursuant to Rule 32(c) of the Federal Rules of 
Criminal Procedure, victims of the offense shall be permitted to 
submit, and the probation officer shall receive, a victim impact 
statement that identifies the victim of the offense and the extent and 
scope of the injury and loss suffered by the victim, including the 
estimated economic impact of the offense on that victim.
    ``(2) Persons permitted to submit victim impact statements shall 
include--
            ``(A) producers and sellers of legitimate works affected by 
        conduct involved in the offense;
            ``(B) holders of intellectual property rights in such 
        works; and
            ``(C) the legal representatives of such producers, sellers, 
        and holders.''.
    (f) Trafficking in Counterfeit Goods or Services.--Section 2320 of 
title 18, United States Code, is amended--
            (1) by redesignating subsections (d) and (e) as subsections 
        (e) and (f), respectively; and
            (2) by inserting after subsection (c) the following:
    ``(d)(1) During preparation of the presentence report pursuant to 
Rule 32(c) of the Federal Rules of Criminal Procedure, victims of the 
offense shall be permitted to submit, and the probation officer shall 
receive, a victim impact statement that identifies the victim of the 
offense and the extent and scope of the injury and loss suffered by the 
victim, including the estimated economic impact of the offense on that 
victim.
    ``(2) Persons permitted to submit victim impact statements shall 
include--
            ``(A) producers and sellers of legitimate goods or services 
        affected by conduct involved in the offense;
            ``(B) holders of intellectual property rights in such goods 
        or services; and
            ``(C) the legal representatives of such producers, sellers, 
        and holders.''.
    (g) Directive to Sentencing Commission.--(1) Under the authority of 
the Sentencing Reform Act of 1984 (Public Law 98-473; 98 Stat. 1987) 
and section 21 of the Sentencing Act of 1987 (Public Law 100-182; 101 
Stat. 1271; 18 U.S.C. 994 note) (including the authority to amend the 
sentencing guidelines and policy statements), the United States 
Sentencing Commission shall ensure that the applicable guideline range 
for a defendant convicted of a crime against intellectual property 
(including offenses set forth at section 506(a) of title 17, United 
States Code, and sections 2319, 2319A, and 2320 of title 18, United 
States Code) is sufficiently stringent to deter such a crime and to 
adequately reflect the additional considerations set forth in paragraph 
(2) of this subsection.
    (2) In implementing paragraph (1), the Sentencing Commission shall 
ensure that the guidelines provide for consideration of the retail 
value and quantity of the items with respect to which the crime against 
intellectual property was committed.

SEC. 3. INFRINGEMENT BY UNITED STATES.

    Section 1498(b) of title 28, United States Code, is amended by 
striking ``remedy of the owner of such copyright shall be by action'' 
and inserting ``action which may be brought for such infringement shall 
be an action by the copyright owner''.

SEC. 4. CLARIFICATION OF LIABILITY FOR COPYRIGHT INFRINGEMENT.

    Except as expressly provided in this Act, nothing in this Act or 
the amendments made by this Act modifies liability for copyright 
infringement, including the standard of willfulness for criminal 
infringement.

                          Purpose and Summary

    The purpose of H.R. 2265, as amended, is to reverse the 
practical consequences of United States v. LaMacchia, 871 F. 
Supp. 535 (D. Mass. 1994) [hereinafter LaMacchia], which held, 
inter alia, that electronic piracy of copyrighted works may not 
be prosecuted under the federal wire fraud statute; and that 
criminal sanctions available under Titles 17 and 18 of the U.S. 
Code for copyright infringement do not apply in instances in 
which a defendant does not realize a commercial advantage or 
private financial gain.

                  Background and Need for Legislation

                    The Extent of Electronic Piracy

    Section 106 of the Copyright Act (Title 17 of the U.S. 
Code) gives the owner of a copyright the . . . exclusive rights 
. . . to reproduce ``. . . [and] distribute copies of . . . the 
copyrighted work. . . .'' An individual who otherwise violates 
any of these exclusive rights is an infringer, and may be 
subject to criminal penalties set forth in Section 506 of the 
Act and section 2319 of Title 18. Current penalties include 
fines of $250,000 per individual ($500,000 per organization) 
and imprisonment of up to five years (10 years for second or 
subsequent offenses).
    Notwithstanding these penalties, copyright piracy 
flourishes in the software world. Industry groups estimate that 
counterfeiting and piracy of intellectual property--especially 
computer software, compact discs, and movies--cost the affected 
copyright holders more than $11 billion last year (others 
believe the figure is closer to $20 billion). In some 
countries, software piracy rates are as high as 90% of all 
sales. The U.S. rate is far lower (27%), but the dollar losses 
($2.3 billion) are the highest worldwide. The effect of this 
volume of theft is substantial: 130,000 lost U.S. jobs, $5.6 
billion in corresponding lost wages, $1 billion in lower tax 
revenue, and higher prices for honest purchasers of copyrighted 
software.
    Unfortunately, the potential for this problem to worsen is 
great. By the turn of the century the Internet is projected to 
have more than 200 million users, and the development of new 
technology will create additional incentive for copyright 
thieves to steal protected works. The advent of digital video 
discs, for example, will enable individuals to store far more 
material on conventional discs and, at the same time, produce 
perfect secondhand copies. The extension of an audio-
compression technique, commonly referred to as MP-3, now 
permits infringers to transmit large volumes of CD-quality 
music over the Internet. As long as the relevant technology 
evolves in this way, more piracy will ensue. Many computer 
users are either ignorant that copyright laws apply to Internet 
activity, or they simply believe that they will not be caught 
or prosecuted for their conduct.
    In light of this disturbing trend, it is manifest that 
Congress must respond appropriately with additional penalties 
to dissuade such conduct.

                          The La Macchia Case

    Representative Goodlatte introduced H.R. 2265 on July 25, 
1997. Chairman Coble, Ranking Member Frank, and Representative 
Cannon of the Subcommittee on Courts and Intellectual Property 
are cosponsors of the bill.
    H.R. 2265 constitutes a legislative response to the 
LaMacchia case, in which the defendant, a graduate student 
attending MIT, encouraged lawful purchasers of copyrighted 
computer games and other software to upload these works via a 
special password to an electronic bulletin board on the 
Internet. The defendant then transferred the works to another 
electronic address and urged other persons with access to a 
second password to download the materials for personal use 
without authorization by or compensation to the copyright 
owners. The defendant never benefitted financially from any of 
these transactions.
    A federal grand jury returned a one-count indictment 
against the defendant, charging him with violating a federal 
wire fraud statute (18 U.S.C. 1343). The Massachusetts district 
court dismissed the case, however, ruling that Congress never 
envisioned protecting copyrights under the wire fraud statute. 
The court further noted that criminal copyright infringement 
law, from its origin in the Copyright Act of 1897 through 
passage of the Copyright Felony Act of 1992, always required 
prosecutors to prove that a defendant acted willfully and for 
commercial advantage or private financial gain. LaMacchia, as 
noted, did not personally benefit from his conduct. In 
concluding dicta, the court observed that Congress has always 
tread cautiously and deliberately in amending the Copyright 
Act, especially when devising criminal penalties for 
infringement; and that it is Congress's prerogative to change 
the law if it wishes to criminalize LaMacchia-like behavior.
    In effect, H.R. 2265 does just that: it criminalizes 
computer theft of copyrighted works, whether or not the 
defendant derives a direct financial benefit from the act(s) of 
misappropriation, thereby preventing such willful conduct from 
destroying businesses, especially small businesses, that depend 
on licensing agreements and royalties for survival.

                                Hearings

    The Committee's Subcommittee on Courts and Intellectual 
Property held an oversight hearing on electronic piracy of 
copyrighted works and a legislative hearing on H.R. 2265, the 
``No Electronic Theft (NET) Act,'' on September 11, 1997. 
Testimony was received from eight witnesses who, collectively, 
represented two government entities, two corporations, and four 
industry trade associations.

                        Committee Consideration

    On September 30, 1997, the Subcommittee on Courts and 
Intellectual Property met in open session and ordered reported 
the bill, H.R. 2265, as amended, by voice vote, a quorum being 
present. On October 7, 1997, the Committee met in open session 
and ordered reported favorably the bill, H.R. 2265, with 
amendment by voice vote, a quorum being present.

                      Committee Oversight Findings

    In compliance with clause 2(l)(3)(A) of rule XI of the 
Rules of the House of Representatives, the Committee reports 
that the findings and recommendations of the Committee, based 
on oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

         Committee on Government Reform and Oversight Findings

    No findings or recommendations of the Committee on 
Government Reform and Oversight were received as referred to in 
clause 2(l)(3)(D) of rule XI of the Rules of the House of 
Representatives.

               New Budget Authority and Tax Expenditures

    Clause 2(l)(3)(B) of House Rule XI is inapplicable because 
this legislation does not provide new budget authority or 
increased tax expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 2(l)(3)(C) of rule XI of the 
Rules of the House of Representatives, the Committee sets 
forth,with respect to the bill, H.R. 2265, the following 
estimate and comparison prepared by the Director of the 
Congressional Budget Office under section 403 of the 
Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, October 16, 1997.
Hon. Henry J. Hyde, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2265, the No 
Electronic Theft (NET) Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Rachel 
Forward (for federal costs), who can be reached at 226-2860, 
and Alyssa Trzeszkowski (for revenues), who can be reached at 
226-2720.
            Sincerely,

                                           June E. O'Neill, Director.  
    Enclosure.

H.R. 2265--No Electronic Theft (NET) Act
    CBO estimates that enacting H.R. 2265 would not result in 
any significant net costs to the federal government. The bill 
would affect direct spending and receipts through the 
imposition of criminal fines and the resulting spending from 
the Crime Victims Fund. Therefore, pay-as-you-go procedures 
would apply. CBO estimates, however, that the amounts of 
additional direct spending and receipts would not be 
significant. H.R. 2265 contains no intergovernmental or 
private-sector mandates as defined in the Unfunded Mandates 
Reform Act of 1995 and would not affect the budgets of state, 
local, or tribal governments.
    H.R. 2265 would establish criminal fines and penalties for 
reproducing and distributing copyrighted works by electronic 
means even if the perpetrator does not benefit financially from 
the theft. Based on information from the Department of Justice 
(DOJ), CBO expects that enacting this bill would enable DOJ to 
prosecute several additional copyright infringement cases each 
year. Because DOJ may prosecute certain criminal cases that 
would not be tried under current law, enacting H.R. 2265 could 
result in additional costs for federal prosecutors and the 
federal court system, subject to the availability of 
appropriated funds. CBO, however, expects that any additional 
discretionary costs would not be significant.
    Depending on whether DOJ wins a case, the fine assessed for 
each case could range from about $25,000 to $50,000 of more. 
Any collections from such fines are recorded on the budget as 
governmental receipts (revenues). They are deposited in the 
Crime Victims Fund and spent the following year. Because any 
increase in direct spending under H.R. 2265 would be the same 
as the amount collected with a one-year lag, the additional 
direct spending would be negligible.
    H.R. 2265 also would extend from three years to five years 
the statute of limitations on criminal proceedings brought 
under the Copyright Act and would permit victims of copyright 
infringement to submit information on the damages caused by the 
infringement during the sentencing phase of the infringer's 
trial. CBO estimates that these provisions would not have any 
budgetary impact.
    The CBO staff contacts for this estimate are Rachel Forward 
(for federal costs), who can be reached at 226-2860, and Alyssa 
Trzeszkowski (for revenues), who can be reached at 226-2720. 
This estimate was approved by Robert A. Sunshine, Deputy 
Assistant Director for Budget Analysis.

                   Constitutional Authority Statement

    Pursuant to Rule XI, clause 2(l)(4) of the Rule of the 
House of Representatives, the Committee finds the authority for 
this legislation in Article I, clause 8, section 8 of the 
Constitution.

               Section-by-Section Analysis and Discussion

                         Section 1--Short Title

    The short title of the legislation is the ``No Electronic 
Theft (NET) Act.''

        Section 2--Changes to Titles 17 and 18 of the U.S. Code

``Financial Gain'' Defined
    The bill amends the term ``financial gain'' as used in the 
Copyright Act to include ``receipt, or expectation of receipt, 
of anything of value, including the receipt of other 
copyrighted works. '' This revision, set forth in Section 2(a) 
of H.R. 2265, will enable authorities to prosecute someone like 
LaMacchia who steals or helps others to steal copyrighted works 
but who otherwise does not profit financially from the theft. 
In addition, the en bloc amendment adopted by the Subcommittee 
added the phrase ``expectation of receipt'' to the bill as 
drafted in deference to a suggestion by a subcommittee witness 
who testified that it is difficult, if not impossible, to prove 
that money has changed hands when the Department of Justice 
raids a duplicating laboratory or warehouse to seize pirated 
works.
Phonorecords, Other Copyrighted Works, and Related Infringement
    Under the amended bill's rewording of Section 506(a) of the 
Copyright Act,

        [a]ny person who infringes a copyright willfully either 
        (1) for purposes of commercial advantage or private 
        financial gain; or (2) 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 with a total retail value 
        of more than $1,000, shall be punished as provided 
        under Section 2319 of Title 18.

    The Copyright Office recommended that the Subcommittee 
codify the threshold limits of Paragraph (2), id., governing 
time periods, number of copies misappropriated, and their 
retail value under Title 17 rather than Title 18. This change 
was incorporated in the Subcommittee en bloc amendment and 
remains a part of the bill.
    In addition, the full Committee, as part of its en bloc 
amendment, revised the misdemeanor threshold under the bill. 
Pursuant to this change, a misdemeanor is defined as an offense 
in which an individual reproduces or distributes one or more 
copies or phonorecords of one or more copyrighted works with a 
total retail value of more than $1,000. The Committee adopted 
this change in response to a suggestion by the Department of 
Justice, which envisions prosecuting some infringment cases 
that would fall below the misdemeanor standard incorporated in 
the bill as reported by the Subcommittee (10 or more copies 
with a total retail value of between $1,000 and $2,500). The 
Department believes it will want to pursue some actions 
involving thefts of fewer than 10 copies or phonorecords of 
especially popular or valuable copyrighted works.
    The practical significance of these changes is that they 
criminalize LaMacchia-like behavior; that is, ``computerized'' 
misappropriation in which the infringer does not realize a 
direct financial benefit but whose actions nonetheless 
substantially damage the market for copyrighted works. De 
minimis infringement (e.g., a teen-ager copying a software 
program for a younger sibling) will not be punished. At the 
same time, however, the Department of Justice, in its 
discretion, will be allowed to use the newly-defined 
misdemeanor standard to extract plea bargains from infringers 
who would otherwise be prosecuted under the felony threshold 
(10 copies with a total retail value of $2,500 or more).
Clarification of Penalties
    The bill as drafted established a higher threshold ($5,000) 
for felony prosecution under its terms. The Subcommittee, 
however, elected to retain the current threshold ($2,500) in 
the en bloc amendment pursuant to recommendations made at the 
hearing by certain members of the copyright community. In light 
of their willingness to accept the substitution of a de minimis 
threshold for the Subcommittee misdemeanor standard (more than 
$1,000 but less than $2,500), the retention of the $2,500-
felony offense was even more appropriate. As noted, the full 
Committee changed the misdemeanor standard further while 
retaining the Subcommittee version of the felony offense.
    Taken together, the changes set forth in the bill as 
amended result in the following criminal penalties governing 
willful infringement under Section 2319 of Title 18:

          (1) For purposes of commercial advantage or private 
        financial gain:
            (a) imprisonment of not more than five years, or 
        fines of not more than $250,000 per individual 
        ($500,000 per organization), or both,if the offense 
        consists of the reproduction or distribution, including 
        by electronic means, in any 180-day period, of at least 
        10 copies or phonorecords of one or more copyrighted 
        works with a total retail value of $2,500;
            (b) imprisonment of not more than 10 years, or 
        fines of not more than $250,000 per individual 
        ($500,000 per organization), or both, if the offense is 
        a second or subsequent offense under (a), id.;
            (c) imprisonment of not more than one year, or 
        fines of not more than $100,000, or both, in every 
        other case.
          (2) For reproduction or distribution, including by 
        electronic means, during any 180-day period, of one or 
        more copies or phonorecords of one or more copyrighted 
        works, which have a total retail value of more than 
        $1,000:
            (a) imprisonment of not more than three years, or 
        fines of not more than $250,000 per individual 
        ($500,000 per organization), or both, in a case 
        involving a total retail value of $2,500 or more;
            (b) imprisonment of not more than six years, or 
        fines of not more than $250,000 per individual 
        ($500,000 per organization), or both, if the offense is 
        a second or subsequent offense under (a), id.; and
            (c) imprisonment of not more than one year, or 
        fines of not more than $100,000, or both, in a case 
        involving a total retail value of $1,000.
Victim's Impact Statement and Sentencing
    Section 2319 of Title 18 addresses criminal infringement of 
copyrights, while Section 2319A of that same Title prohibits 
``bootlegging'' (audio taping and videotaping) of live musical 
performances, as well as trafficking in bootlegged products. 
Section 2320 proscribes the act of trafficking in counterfeit 
(pirated) goods or services.
    Sections 2(d) and (e) of the bill permit three classes of 
``victims'' to submit impact statements during the sentencing 
phase of an infringer's trial. See Fed. R. Crim. P. 32(c). The 
three classes are comprised of producers and sellers of 
legitimate works affected by criminal conduct that is the 
subject of Sections 2319, 2319A, and 2320; the relevant 
copyright holders; and the legal representatives of the 
producers, sellers, and copyright holders.
    Any such statement will be made part of the presentence 
report which a sentencing judge reviews before rendering a 
decision, and elaborates on the scope of the defendant's 
behavior, especially as it contributed to a victim's economic 
loss as a result of infringement. Egregious conduct as 
documented by a victim's impact statement would compel a judge 
to deliver a tougher sentence in a given case.
Sentencing Commission
    Section 2(g) of H.R. 2265 directs the U.S. Sentencing 
Commission to ensure that its guideline range is ``sufficiently 
stringent'' to deter crime against intellectual property, 
including those offenses set forth in Section 506(a) of the 
Copyright Act and Sections 2319, 2319A, and 2320 of Title 18.
``Willful'' Misconduct Defined
    The Ranking Member from Massachusetts made clear when 
questioning witnesses during the September 11 hearing that the 
Subcommittee could improve the bill by amending it to define 
``willful'' misconduct. In the absence of such clarification, 
those with questions concerning the meaning of the word and its 
application in the electronic environment were reluctant to 
rely on report language or existing case law for guidance.
    Accordingly, the en bloc amendment adopted by the 
Subcommittee contains a provision, now set forth in Section 
Four, which states that nothing in the bill ``. . . modifies 
liability for copyright infringement, including the standard of 
willfulness for criminal infringement.'' By accepting this 
provision, the Subcommittee (and full Committee) intend that 
H.R. 2265 will not change the current interpretation of the 
word as developed by case law and as applied by the Department 
of Justice.
    The issue was resurrected during full Committee 
consideration of the bill when Representative Goodlatte 
offered, but eventually withdrew, an amendment to clarify the 
point further. The Goodlatte amendment stated that, for 
purposes of Section 506(a) of the Copyright Act only, ``. . . a 
person does not infringe a copyright willfully unless that 
person has an intent to violate another person's copyright'' 
(italic added). Some members noted that federal case law on the 
subject was not entirely uniform, and that the Goodlatte 
amendment might make it more difficult for the Department of 
Justice, in some instances, to prosecute cases. Chairman Coble 
observed that the use of the word ``intent'' in the Goodlatte 
amendment might inadvertently cause some to ascribe a different 
meaning to ``willfully'' as it is currently understood, since 
the majority view on the matter is that ``willful'' conduct 
necessitates ``intent.''
    Chairman Coble also emphasized that other parties 
interested in shaping H.R. 2265 might use the bill to influence 
the progress of separate legislation, H.R. 2180, which speaks 
to the liability of on-line service providers in the electronic 
environment. The bills are unrelated on the point of 
willfulness, since H.R. 2180 addresses civil infringment of 
copyrights, while H.R. 2265 deals with criminal misconduct. In 
fact, the Department of Justice contrasts criminal copyright 
actions with civil copyright infringement by noting that the 
latter ``. . . remains a strict liability tort.'' Federal 
Prosecution of Violations of Intellectual Property Rights, U.S. 
Dept. Of Justice (May 1997) at p. 24.
Non-Application to Intelligence Gathering Activities
    The National Security Agency (NSA) informed the 
Subcommittee that the bill as written might technically apply 
to, and therefore inhibit, the legitimate intelligence 
gathering activities of various federal entities and workers on 
behalf of the U.S. government. The NSA sought assurance from 
the Subcommittee that H.R. 2265 would not interfere with 
current federal law on the matter, codified at 28 U.S.C. 1498. 
In brief, that statute confines copyright infringement cases 
against the government to the Court of Federal Claims for the 
recovery of damages. Language set forth in the en bloc 
amendment adopted by the full Committee makes clear that the 
``. . . exclusive action which may be brought for . . . 
infringement shall be an action by the copyright owner . . .'' 
under 28 U.S.C. 1498 (italic added). Since an action is either 
civil or criminal, and the existing statute addressing the 
matter speaks only to a civil remedy, the language added to the 
bill in Section Three ensures that H.R. 2265 will not apply to 
intelligence gathering activities that are protected and dealt 
with in 28 U.S.C. 1498.
Statute of Limitations
    Finally, the bill requires that any criminal proceeding 
brought under the Copyright Act must commence within five years 
from the time the cause of action arose. The current limit, as 
contained in Section 507(a) of the Act, is three years.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3 of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, existing law in which no change 
is proposed is shown in roman):

                      TITLE 17, UNITED STATES CODE

          * * * * * * *

            CHAPTER 1--SUBJECT MATTER AND SCOPE OF COPYRIGHT

          * * * * * * *

Sec. 101. Definitions

    Except as otherwise provided in this title, as used in this 
title, the following terms and their variant forms mean the 
following:
          * * * * * * *
            To ``display'' a work means to show a copy of it, 
        either directly or by means of a film, slide, 
        television image, or any other device or process or, in 
        the case of a motion picture or other audiovisual work, 
        to show individual images nonsequentially.
            The term ``financial gain'' includes receipt, or 
        expectation of receipt, of anything of value, including 
        the receipt of other copyrighted works.
          * * * * * * *

             CHAPTER 5--COPYRIGHT INFRINGEMENT AND REMEDIES

          * * * * * * *

Sec. 506. Criminal offenses

    [(a) Criminal Infringement.--Any person who infringes a 
copyright willfully and for purposes of commercial advantage or 
private financial gain shall be punished as provided in section 
2319 of title 18.]
    (a) Criminal Infringement.--Any person who infringes a 
copyright willfully either--
            (1) for purposes of commercial advantage or private 
        financial gain, or
            (2) 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,
shall be punished as provided under section 2319 of title 18.
          * * * * * * *

Sec. 507. Limitations on actions

    (a) Criminal Proceedings.--No criminal proceeding shall be 
maintained under the provisions of this title unless it is 
commenced within [three] 5 years after the cause of action 
arose.
          * * * * * * *
                              ----------                              


              CHAPTER 113 OF TITLE 18, UNITED STATES CODE

                      CHAPTER 113--STOLEN PROPERTY

          * * * * * * *

Sec. 2319. Criminal infringement of a copyright

    (a) Whoever violates section 506(a) (relating to criminal 
offenses) of title 17 shall be punished as provided in 
[subsection (b)] subsections (b) and (c) of this section and 
such penalties shall be in addition to any other provisions of 
title 17 or any other law.
    (b) Any person who commits an offense under [subsection (a) 
of this section] section 506(a)(1) of title 17--
            (1) shall be imprisoned not more than 5 years, or 
        fined in the amount set forth in this title, or both, 
        if the offense consists of the reproduction or 
        distribution, including by electronic means, during any 
        180-day period, of at last 10 copies or phonorecords, 
        of 1 or more copyrighted works, [with a retail value of 
        more than $2,500] which have a total retail value of 
        more than $2,500;
          * * * * * * *
    (c) Any person who commits an offense under section 
506(a)(2) of title 17--
            (1) shall be imprisoned not more than 3 years, or 
        fined in the amount set forth in this title, or both, 
        if the offense consists of the reproduction or 
        distribution of 10 or more copies or phonorecords of 1 
        or more copyrighted works, which have a total retail 
        value of $2,500 or more;
            (2) shall be imprisoned not more than 6 years, or 
        fined in the amount set forth in this title, or both, 
        if the offense is a second or subsequent offense under 
        paragraph (1); and
            (3) shall be imprisoned not more than 1 year, or 
        fined in the amount set forth in this title, or both, 
        if the offense consists of the reproduction or 
        distribution of 1 or more copies or phonorecords of 1 
        or more copyrighted works, which have a total retail 
        value of more than $1,000.
    (d)(1) During preparation of the presentence report 
pursuant to Rule 32(c) of the Federal Rules of Criminal 
Procedure, victims of the offense shall be permitted to submit, 
and the probation officer shall receive, a victim impact 
statement that identifies the victim of the offense and the 
extent and scope of the injury and loss suffered by the victim, 
including the estimated economic impact of the offense on that 
victim.
    (2) Persons permitted to submit victim impact statements 
shall include--
            (A) producers and sellers of legitimate works 
        affected by conduct involved in the offense;
            (B) holders of intellectual property rights in such 
        works; and
            (C) the legal representatives of such producers, 
        sellers, and holders.
    [(c)] (e) As used in this section--
            (1) the terms ``phonorecord'' and ``copies'' have, 
        respectively, the meanings set forth in section 101 
        (relating to definitions) of title 17; and
            (2) the terms ``reproduction'' and ``distribution'' 
        refer to the exclusive rights of a copyright owner 
        under clauses (1) and (3) respectively of section 106 
        (relating to exclusive rights in copyrighted works), as 
        limited by sections 107 through 120, of title 17.

Sec. 2319A. Unauthorized fixation of and trafficking in sound 
                    recordings and music videos of live musical 
                    performances

    (a) * * *
    (d) Victim Impact Statement.--(1) During preparation of the 
presentence report pursuant to Rule 32(c) of the Federal Rules 
of Criminal Procedure, victims of the offense shall be 
permitted to submit, and the probation officer shall receive, a 
victim impact statement that identifies the victim of the 
offense and the extent and scope of the injury and loss 
suffered by the victim, including the estimated economic impact 
of the offense on that victim.
    (2) Persons permitted to submit victim impact statements 
shall include--
            (A) producers and sellers of legitimate works 
        affected by conduct involved in the offense;
            (B) holders of intellectual property rights in such 
        works; and
            (C) the legal representatives of such producers, 
        sellers, and holders.
          * * * * * * *
    [(d)] (e) Definitions.--As used in this section--
            (1) the terms ``copy'', ``fixed'', ``musical 
        work'', ``phonorecord'', ``reproduce'', ``sound 
        recordings'', and ``transmit'' mean those terms within 
        the meaning of title 17; and
            (2) the term ``traffic in'' means transport, 
        transfer, or otherwise dispose of, to another, as 
        consideration for anything of value, or make or obtain 
        control of with intent to transport, transfer, or 
        dispose of.
    [(e)] (f) Applicability.--This section shall apply to any 
Act or Acts that occur on or after the date of the enactment of 
the Uruguay Round Agreements Act.

Sec. 2320. Trafficking in counterfeit goods or services

    (a) * * *
          * * * * * * *
    (d)(1) During preparation of the presentence report 
pursuant to Rule 32(c) of the Federal Rules of Criminal 
Procedure, victims of the offense shall be permitted to submit, 
and the probation officer shall receive, a victim impact 
statement that identifies the victim of the offense and the 
extent and scope of the injury and loss suffered by the victim, 
including the estimated economic impact of the offense on that 
victim.
    (2) Persons permitted to submit victim impact statements 
shall include--
            (A) producers and sellers of legitimate goods or 
        services affected by conduct involved in the offense;
            (B) holders of intellectual property rights in such 
        goods or services; and
            (C) the legal representatives of such producers, 
        sellers, and holders.
    [(d)] (e) For the purposes of this section--
            (1) * * *
          * * * * * * *
    [(e)] (f) Beginning with the first year after the date of 
enactment of this subsection, the Attorney General shall 
include in the report of the Attorney General to Congress on 
the business of the Department of Justice prepared pursuant to 
section 522 of title 28, an accounting, on a district by 
district basis, of the following with respect to all actions 
taken by the Department of Justice that involve trafficking in 
counterfeit labels for phonorecords, copies of computer 
programs or computer program documentation or packaging, copies 
of motion pictures or other audiovisual works (as defined in 
section 2318 of title 18), criminal infringement of copyrights 
(as defined in section 2319 of title 18), unauthorized fixation 
of and trafficking in sound recordings and music videos of live 
musical performances (as defined in section 2319A of title 18), 
or trafficking in goods or services bearing counterfeit marks 
(as defined in section 2320 of title 18):
            (1) * * *
          * * * * * * *
                              ----------                              


              SECTION 1498 OF TITLE 28, UNITED STATES CODE

Sec. 1498. Patent and copyright cases

    (a) * * *
    (b) Hereafter, whenever the copyright in any work protected 
under the copyright laws of the United States shall be 
infringed by the United States, by a corporation owned or 
controlled by the United States, or by a contractor, 
subcontractor, or any person, firm, or corporation acting for 
the Government and with the authorization or consent of the 
Government, the exclusive [remedy of the owner of such 
copyright shall be by action] action which may be brought for 
such infringement shall be an action by the copyright owner 
against the United States in the Court of Federal Claims for 
the recovery of his reasonable and entire compensation as 
damages for such infringement, including the minimum statutory 
damages as set forth in section 504(c) of title 17, United 
States Code: Provided, That a Government employee shall have a 
right of action against the Government under this subsection 
except where he was in a position to order, influence, or 
induce use of the copyrighted work by the Government: Provided, 
however, That this subsection shall not confer a right of 
action on any copyright owner or any assignee of such owner 
with respect to any copyrighted work prepared by a person while 
in the employment or service of the United States, where the 
copyrighted work was prepared as a part of the official 
functions of the employee, or in the preparation of which 
Government time, material, or facilities were used: And 
provided further, That before such action against the United 
States has been instituted the appropriate corporation owned or 
controlled by the United States or the head of the appropriate 
department or agency of the Government, as the case may be, is 
authorized to enter into an agreement with the copyright owner 
in full settlement and compromise for the damages accruing to 
him by reason of such infringement and to settle the claim 
administratively out of available appropriations.
          * * * * * * *

                                    
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