[Federal Register Volume 64, Number 246 (Thursday, December 23, 1999)]
[Notices]
[Pages 72129-72134]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-33380]


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UNITED STATES SENTENCING COMMISSION


Sentencing Guidelines for United States Courts

AGENCY: United States Sentencing Commission.

ACTION: Notice of: (1) Proposed options for promulgating a temporary, 
emergency guideline amendment revising the guideline for offenses 
involving electronic copyright infringement; and (2) intent to re-
promulgate as a permanent amendment to the sentencing guidelines the 
temporary emergency guideline amendment relating to telemarketing fraud 
offenses. Request for Comment. Notice of public hearing.

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SUMMARY: (1) The Commission is preparing to promulgate a temporary, 
emergency guideline amendment to Sec. 2B5.3 (Criminal Infringement of 
Copyright or Trademark) and accompanying commentary to implement the 
directive contained in section 2(g) of the No Electronic Theft (NET) 
Act of 1997. This notice sets forth three options for implementing that 
directive.
    The proposed amendment is presented in one of two formats. First, 
the amendment is proposed as specific revisions to guideline Sec. 2B5.3 
and accompanying commentary. Bracketed text within a proposed amendment 
indicates a heightened interest on the Commission's part for comment 
and suggestions for alternative policy choices; for example, a proposed 
enhancement of [2] levels indicates that the Commission is considering, 
and invites comment on, alternative policy choices regarding the 
appropriate level of enhancement. Similarly, a bracketed specific 
offense characteristic means that the Commission invites comment on 
whether the provision is appropriate as a specific offense 
characteristic, or whether it should be considered as a departure 
factor, or not at all. Second, the Commission has highlighted certain 
issues for comment and invites suggestions for how the Commission 
should respond to those issues.
    Recently, Congress clarified the Commission's emergency amendment 
authority to implement the directive in the NET Act. The Commission 
must implement that directive within 120 days of the enactment of the 
Digital Theft Deterrence and Copyright Damages Improvement Act of 1999 
(not later than April 6, 2000).
    (2) The Commission proposes to make permanent the temporary, 
emergency guideline amendment to Sec. 2F1.1 (Fraud and Deceit) and 
Sec. 3A1.1 (Hate Crime Motivation or Vulnerable Victim) promulgated by 
the Commission in September 1998. This emergency amendment was issued 
to implement section 6 of the Telemarketing Fraud Prevention Act of 
1998. The Commission proposes to re-promulgate as a permanent amendment 
the temporary emergency telemarketing fraud amendment without change.

DATES: (1) The NET Act temporary, emergency amendment.--Comment on the 
proposed amendment should be received by the Commission not later than 
January 26, 2000. After considering any public comment, the Commission 
plans to promulgate a temporary emergency amendment not later than 
April 6, 2000. (2) The telemarketing fraud amendment.--Comment on the 
proposed re-promulgation of the telemarketing fraud amendment should be 
received not later than March 10, 2000. (3) Public hearing.--The 
Commission has scheduled a public hearing for March 23, 2000, at the 
Thurgood Marshall Federal Judiciary Building, One Columbus Circle, 
N.E., Washington, D.C. 20002-8002 (time to be announced). The scope of 
the hearing is expected to include the proposed re-promulgation of the 
telemarketing fraud amendment described herein and any other permanent 
amendments that may be proposed for action in this amendment cycle 
ending May 1. (The Commission may promulgate a temporary, emergency 
guideline amendment to implement the NET Act before the public hearing 
on March 23.) A person who desires to testify at the public hearing 
should notify Michael Courlander, Public Affairs Officer, at (202) 502-
4590 not later than March 10, 2000. Written testimony for the hearing 
must be received by the Commission not later than March 16, 2000. 
Submission of written testimony is a requirement for testifying at the 
public hearing.

ADDRESSES: Send comments to: United States Sentencing Commission, One 
Columbus Circle, N.E., Suite 2-500 South, Washington, DC 20002-8002, 
Attention: Public Information--Public Comment.

FOR FURTHER INFORMATION CONTACT: Michael Courlander, Public Affairs 
Officer, Telephone: (202) 502-4590.

SUPPLEMENTARY INFORMATION: Reports and other additional information 
pertaining to the proposed amendments described in this notice may be 
accessed through the Commission's website at www.ussc.gov.

    Authority: 28 U.S.C. 994(a), (o), (p), (x); USSC Rules of 
Practice and Procedure 4.3, 4.4.
Diana E. Murphy,
Chair.

Proposed Temporary, Emergency Guideline Amendment

    1. Synopsis of Proposed Amendment: The No Electronic Theft (NET) 
Act of 1997, Pub. L. 105-147, directs the Commission to: (1) Ensure 
that the applicable guideline range for a crime committed 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 (2) ensure that the guidelines provide for consideration of 
the retail value and quantity of the items with respect to which the 
intellectual property offense was committed.
    This proposal presents three options for implementing the 
congressional directives. Each option implements the directives by 
changing the monetary calculation currently found in the copyright and 
trademark infringement guideline, Sec. 2B5.3, to provide for 
consideration of the retail value of the infringed item. (Currently, 
Sec. 2B5.3(b)(1) contains an enhancement based on a calculation of the 
retail value of the infringing item multiplied by the quantity of 
infringing items.) Some or all of a number of aggravating and 
mitigating factors could be incorporated into the guideline as an 
additional means of implementing the directive to provide sufficient 
deterrence. (These factors, or some combination thereof, are presented 
in Options 2 and 3 but

[[Page 72130]]

could be added to Option 1 as well. In addition, any number of these 
factors could form the basis for a departure provision.)
    The NET Act gave the Commission emergency authority to promulgate 
temporary amendments necessary to implement the Act's directives. The 
recently enacted Digital Theft Deterrence and Copyright Damages 
Improvement Act of 1999 requires the Commission to promulgate the 
emergency amendments within 120 days after the date of the enactment of 
that Act, i.e., by April 6, 2000.

(A) Option 1

    Option 1 provides the most direct and straightforward manner for 
implementing the directive to provide for consideration of the retail 
value of the infringed item. Option 1 amends the copyright and 
trademark infringement guideline to provide a sentencing enhancement 
based on a calculation of the retail value of the infringed item 
multiplied by the quantity of infringing items for all copyright and 
trademark offenses. As presented, it does not incorporate any 
additional enhancements or adjustments for aggravating or mitigating 
factors, nor does it propose any change in the base offense level 
(although this, too, could be made a part of that option).
    An arguable disadvantage of Option 1 is that it likely would 
overstate the pecuniary harm caused to copyright and trademark owners 
in the majority of cases currently sentenced under the guideline 
because it presumes: (1) a one-to-one correlation between the sale of 
infringing items and the displaced sale of legitimate infringed items, 
which is unlikely in most cases, and (2) that the pecuniary harm 
resulting from each lost sale is equal to the retail value of the 
infringed item. Proposed Application Note 3 would address substantial 
overstatement of pecuniary harm through an invited downward departure 
provision. That proposed application note would also provide an upward 
departure provision for cases in which the pecuniary harm is 
substantially understated.
    Proposed Amendment--Option 1: Strike Sec. 2B5.3 in its entirety and 
insert the following:

Sec. 2B5.3. Criminal Infringement of Copyright or Trademark

    (a) Base Offense Level: 6
    (b) Specific Offense Characteristic
    (1)(A) Except as provided in subdivision (B), if the retail 
value of the infringed items multiplied by the quantity of 
infringing items exceeded $2,000, increase by the number of levels 
from the table in Sec. 2F1.1 (Fraud and Deceit) corresponding to 
that amount.
    (B) If (i) the defendant was convicted of an offense under 18 
U.S.C. 2319A; and (ii) the retail value of the infringing items 
multiplied by the quantity of infringing items exceeded $2,000, 
increase by the number of levels from the table in Sec. 2F1.1 (Fraud 
and Deceit) corresponding to that amount.

Commentary

    Statutory Provisions: 17 U.S.C. 506(a); 18 U.S.C. 2318-2320, 
2511. For additional statutory provision(s), see Appendix A 
(Statutory Index).

Application Notes

    1. Definitions.--For purposes of this guideline:
    ``Infringed items'' means the copyrighted or trademarked items 
with respect to which the crime against intellectual property was 
committed.
    ``Infringing items'' means the items that violate the copyright 
or trademark laws (not the legitimate items that are infringed 
upon).
    2. In a case involving the illegal interception of a satellite 
cable transmission in violation of 18 U.S.C. 2511, the ``retail 
value of the infringed items'', for purposes of subsection 
(b)(1)(A), is the price the user of the transmission would have paid 
to lawfully receive that transmission. (In such a case, the 
``infringed items'' are the satellite transmissions rather than the 
intercepting devices.)
    [3. Departure Provision.--There may be cases in which the 
offense level determined under subsection (b)(1) substantially 
understates or substantially overstates the pecuniary harm caused by 
the offense. In such cases, an upward departure or a downward 
departure, as appropriate, may be warranted.]
    Background: Subsection (b)(1) implements section 2(g) of the No 
Electronic Theft (NET) Act of 1997, which directs the Commission to 
ensure that the guidelines provide for consideration of the retail 
value and quantity of the items with respect to which the 
intellectual property offense was committed.
    Section 2511 of title 18, United States Code, as amended by the 
Electronic Communications Act of 1986, prohibits the interception of 
satellite transmission for purposes of direct or indirect commercial 
advantage or private financial gain. Such violations are similar to 
copyright offenses and are therefore covered by this guideline.

(B) Option 2

    Option 2 is a revised proposal submitted by the Department of 
Justice in August 1998 in response to the Commission's May 1998 Federal 
Register notice (see 63 FR 28202 (1998)) and has not previously been 
published in the Federal Register. Like Option 1, Option 2 amends the 
copyright and trademark infringement guideline to provide an 
enhancement based on a calculation of the retail value of the infringed 
items multiplied by the quantity of infringing items for all copyright 
and trademark offenses (except offenses involving a copyright violation 
of 18 U.S.C. 2319A, for which there is no infringed item). In contrast 
to Option 1, the Department proposed a 2-level reduction in offense 
level (but not less than offense level 6) for offenses involving 
infringing goods with a price less than 10% of the average retail price 
of the infringed item. According to the Department of Justice, this 
downward adjustment is proposed to address the likelihood that 
``relying on the price of the infringed-upon item may lead to an 
inappropriately high economic harm calculation where there is a 
dramatic price differential between the genuine and illegal products.'' 
The Commission has bracketed options for this reduction that would 
provide a 2-level downward adjustment for cases in which the price of 
the infringing item is [10%] [20%] [30%] [40%] [50%] of the retail 
price of the infringed item.
    In addition, Option 2 includes adjustments for two aggravating 
factors and one mitigating factor. It provides a 2-level increase for 
offenses involving ``online electronic infringement,'' and a 2-level 
increase for offenses involving a ``reasonably foreseeable risk to 
public health or safety,'' with a minimum offense level of level 13. It 
also provides a 2-level decrease (but not less than offense level 6) if 
the offense was not committed for purposes of commercial advantage or 
private financial gain.
    Proposed Amendment--Option 2: Strike Sec. 2B5.3 in its entirety and 
insert the following:

Sec. 2B5.3. Criminal Infringement of Copyright or Trademark

    (a) Base Offense Level: 6
    (b) Specific Offense Characteristics
    (1) Except as provided in subsection (2), if the infringed value 
exceeded $2,000, increase by the number of levels from the monetary 
table in Sec. 2F1.1 (Fraud and Deceit) corresponding to that value.
    (2) If (A) the offense involved a copyright violation under 19 
U.S.C. 2319A; and (B) the infringing value exceeded $2,000, increase 
by the number of levels from the monetary table in Sec. 2F1.1 
corresponding to that value.
    (3) If the offense involved online electronic infringement, 
increase by 2 levels.
    (4) If (A) the offense was not committed for commercial purpose 
or private financial gain, or (B) subsection (1) applies and the 
offense involved greatly discounted merchandise, decrease by 2 
levels, but not below level 6.
    (5) If the offense involved a reasonably foreseeable risk to 
public health or safety, increase by 2 levels. If the resulting 
offense level is less than level [13], increase to level [13].

Commentary

    Statutory Provisions: 17 U.S.C. 506(a); 18 U.S.C. 2318-2320, 
2511. For additional statutory provision(s), see Appendix A 
(Statutory Index).

Application Notes

    1. For purposes of this guideline--

[[Page 72131]]

    ``Infringed value'' means the average retail price of the 
infringed-upon item multiplied by the number of the infringing 
items. Average retail price of the infringed-upon item means the 
average price in the retail market at the time of the offense, which 
may be different from the Manufacturer's Suggested Retail Price. In 
cases involving the interception of a communication in violation of 
18 U.S.C. 2511, the infringed value means the price the user would 
have paid if that communication had been obtained lawfully.
    ``Infringing value'' means the price of the infringing item 
multiplied by the number of infringing items.
    ``Greatly Discounted Merchandise'' means infringing goods whose 
price is less than [10%][20%][30%][40%][50%] of the average retail 
price of the infringed-upon item.
    ``Online Electronic Infringement'' includes the unlawful 
producing, reproducing, distributing, selling, performing, or 
trafficking in copyrighted or trademarked articles or services via 
an electronic bulletin board, a worldwide web site or any online 
facility.
    ``Commercial advantage or private financial gain'' includes 
receipt, or expectation of receipt, of anything of value, including 
the receipt of other protected works or products.
    2. In some cases a 2-level enhancement may not reflect the 
seriousness of the risk to public health or safety. In such cases, 
an upward departure may be warranted.
    Background: This guideline treats copyright and trademark 
violations much like fraud. The enhancements in subsections (b)(1) 
and (2) are intended as an approximate determination of the 
aggregate pecuniary harm resulting from trafficking in goods or 
services that violate the copyright or trademark laws. The reduction 
in subsection (b)(4) for greatly discounted merchandise is 
appropriate because in such cases there is some reduced likelihood 
of loss of legitimate sales.
    The Electronic Communications Privacy Act of 1986 prohibits the 
interception of satellite transmission for purposes of direct or 
indirect commercial advantage or private financial gain. Such 
violations are similar to copyright offenses and are therefore 
covered by this guideline.

(C) Option 3

    Like Options 1 and 2, Option 3 amends the copyright and trademark 
infringement guideline to provide for consideration of the retail value 
of the infringed item in all copyright and trademark cases, but that 
value ultimately might not be used in every case. For some cases, the 
retail value of the infringing item is used to calculate the monetary 
adjustment because that value is the more accurate measure of the 
pecuniary harm to the intellectual property owner for those cases.
    Option 3 directs the court to use the retail value of the infringed 
item multiplied by the quantity of infringing items in any case in 
which: (1) the quality and performance of the infringing item are 
identical to, or substantially indistinguishable from, the infringed 
item; (2) the retail value of the infringing item is difficult or 
impossible to determine; or (3) the offense involves the illegal 
interception of a satellite cable transmission in violation of 18 
U.S.C. 2511; or any other case in which the government provides 
sufficient information to demonstrate that the retail value of the 
infringed item provides a more accurate assessment of pecuniary harm to 
the copyright or trademark owner than the retail value of the 
infringing item. The court would use the retail value of the infringing 
item multiplied by the quantity of infringing items (the calculation 
that currently exists in Sec. 2B5.3) for all other copyright and 
trademark offenses.
    Option 3 implements the second directive of the NET Act (to provide 
for consideration of the retail value of the infringed item) by 
permitting the government to show, for any intellectual property 
offense, that such value is the more accurate assessment of lost sales 
to the intellectual property owner than is the use of the retail value 
of the infringing item. An arguable advantage of Option 3 over Options 
1 and 2 is that, by using the retail value of the infringing item in 
some cases, such as those involving obviously inferior counterfeited 
goods, it reduces the likelihood that the pecuniary harm would be 
overstated when the sale of a counterfeit item is not likely to 
displace the sale of a legitimate item on a one-to-one basis.
    Option 3 also presents a number of enhancements and adjustments 
that, as mentioned above, take into account aggravating and mitigating 
factors that may be present in an infringement case. For ease and 
clarity of presentation, they are presented for the most part as 
specific offense characteristics. However, there is an issue for 
comment following Option 3 that addresses whether the Commission should 
adopt these as departure provisions, or not at all.
    The possible additional enhancements and adjustments are as 
follows:
    1. Increase the base offense level from level 6 to level 8. A 2-
level increase in the base offense level would bring the infringement 
guideline more in line with the fraud guideline, Sec. 2F1.1. Both 
guidelines have a base of offense level of level 6; however, the fraud 
guideline contains a 2-level enhancement for more than minimal 
planning, which applies in the great majority of fraud offenses. A 
similar enhancement does not exist in the infringement guideline, but, 
based on a review of cases sentenced under the guideline, if a more 
than minimal planning enhancement did exist, it similarly would apply 
in the majority of infringement cases. Thus, the majority of fraud 
offenses effectively start at an offense level of level 8, whereas 
infringement cases start at an offense level of level 6.
    2. Provide an enhancement of 2 offense levels (or suggested upward 
departure) if the infringing item was distributed by the offender 
before the copyright or trademark owner commercially released the 
infringed item. If the infringing item is a close substitute for the 
infringed item, the harm is exacerbated by denying the copyright or 
trademark owner the front end of the market. If the infringing item is 
substantially inferior, the harm is exacerbated by damaging the 
reputation of the copyright or trademark owner.
    3. Provide an enhancement of 2 offense levels (or suggested upward 
departure) if purchasers of the infringing item were deceived to 
believe that they were purchasing the legitimate infringed item. This 
enhancement takes into account harm to the consumer who is actually 
deceived, over and above the harm to the copyright or trademark owner. 
However, this enhancement may present significant proof problems. An 
attempt to ameliorate those problems by lowering the standard for 
triggering the enhancement to something less than actual deception, 
such as the reasonable likelihood of deception, risks promulgating an 
enhancement that is triggered merely by an element of the offense (see 
18 U.S.C. 2320(e)).
    4. Provide a downward adjustment of 2 offense levels, but not less 
than the base offense level, (or suggested downward departure) if the 
offense was not committed for commercial advantage or private financial 
gain. This proposed adjustment is identical to one included in Option 2 
and takes into account the different statutory penalty structures 
established for these offenses by the NET Act. The Commission has been 
unable to determine the frequency with which such a downward adjustment 
would apply because the statutory change criminalizing such conduct was 
enacted in December 1997, and has formed the basis for a very limited 
number of prosecutions.
    5. Provide an enhancement of 2 offense levels (and a minimum 
offense level of level 12) if the offense involved the manufacture, 
importation, or uploading of infringing items. The uploading prong is 
somewhat similar to the 2-level enhancement proposed in Option 2 for 
online electronic infringement. The Commission estimates that this 
enhancement would

[[Page 72132]]

apply in approximately 60% of the cases currently sentenced under 
Sec. 2B5.3. Defendants who manufacture, import, or upload infringing 
items arguably are more culpable because they initially place 
infringing items in the stream of commerce, thereby enabling many 
others to infringe the copyright or trademark.
    6. Provide an enhancement of 2 offense levels [and minimum offense 
level of level 13 as proposed in Option 2] (or suggested upward 
departure ) if the offense involved the conscious or reckless risk of 
serious bodily injury. The Commission's review of cases sentenced under 
the guideline suggests that this enhancement rarely would apply, which 
might argue for taking this factor into account as a departure 
provision, if at all.
    7. Provide an application note that expressly provides that 
Sec. 3B1.3 (Abuse of Position of Trust or Use of Special Skill) will 
apply if the defendant engaged in de-encryption or circumvented some 
other technological security measure in order to gain initial access to 
copyrighted material. Alternatively, the Commission could suggest an 
upward departure or specific offense characteristic for such cases. As 
stated in the background commentary to Sec. 3B1.3, persons who use a 
special skill to facilitate or commit a crime generally are viewed as 
more culpable. Based on the Commission's review of cases sentenced 
under the copyright and trademark infringement guideline, it is 
anticipated that this adjustment rarely would be applied.
    Proposed Amendment--Option 3: Strike Sec. 2B5.3 in its entirety and 
insert the following:

Sec. 2B5.3. Criminal Infringement of Copyright or Trademark

    (a) Base Offense Level: [8]
    (b) Specific Offense Characteristics
    (1) If the infringement amount exceeded $2,000, increase by the 
number of levels from the table in Sec. 2F1.1 (Fraud and Deceit) 
corresponding to that amount.
    [(2) If the infringing item was distributed before the infringed 
item was commercially released by the copyright or trademark owner, 
increase by [2] levels.]
    [(3) If a purchaser of an infringing item actually believed such 
item was the infringed item, increase by [2] levels.]
    [(4) If the offense was not committed for commercial advantage 
or private financial gain, decrease by [2] levels[, but not less 
than level [6][8]].]
    [(5) If the offense involved the manufacture, importation, or 
uploading of infringing items, increase by [2] levels. If the 
resulting offense level is less than level [12], increase to level 
[12].]
    [(6) If the offense involved the conscious or reckless risk of 
serious bodily injury, increase by [2] levels.] If the resulting 
offense level is less than level [13], increase to level [13].]

Commentary

    Statutory Provisions: 17 U.S.C. 506(a); 18 U.S.C. 2318-2320, 
2511. For additional statutory provision(s), see Appendix A 
(Statutory Index).

Application Notes

    1. Definitions.--For purposes of this guideline:
    ``Commercial advantage or private financial gain'' means the 
receipt, or expectation of receipt, of anything of value, including 
other protected works.
    ``Infringed item'' means the copyrighted or trademarked item 
with respect to which the crime against intellectual property was 
committed.
    ``Infringement amount'' means the approximate pecuniary harm to 
the copyright or trademark owner caused by the offense.
    ``Infringing item'' means the item that violates the copyright 
or trademark laws.
    ``Uploading'' means making an infringing item available by 
electronic means with the intent to enable other persons to download 
or otherwise copy, or have access to, the infringing item.
    2. Determination of Infringement Amount.--This note applies to 
the determination of the infringement amount for purposes of 
subsection (b)(1).
    (A) Use of Retail Value of Infringed Item.--The infringement 
amount is the retail value of the infringed item, multiplied by the 
number of infringing items, in a case involving any of the 
following:
    (i) The quality and performance of the infringing item are 
identical to, or substantially indistinguishable from, the infringed 
item.
    (ii) The retail value of the infringing item is (I) difficult to 
determine without unduly complicating or prolonging the sentencing 
proceeding; or (II) impossible to determine.
    (iii) The offense involves the illegal interception of a 
satellite cable transmission in violation of 18 U.S.C. Sec. 2511. 
(In a case involving such an offense, the `retail value of the 
infringed item' is the price the user of the transmission would have 
paid to lawfully receive that transmission, and the `infringed item' 
is the satellite transmission rather than the intercepting device.)
    (iv) The government provides sufficient information to 
demonstrate that the retail value of the infringed item provides a 
more accurate assessment of the pecuniary harm to the copyright or 
trademark owner than does the retail value of the infringing item.
    (B) Use of Retail Value of Infringing Item.--The infringement 
amount is the retail value of the infringing item, multiplied by the 
number of infringing items, in any case not covered by subdivision 
(A) of this Application Note, including a case involving the 
unlawful recording of a musical performance in violation of 18 
U.S.C. 2319A.
    (C) Determination of Infringement Amount in Cases Involving a 
Variety of Infringing Items.--In a case involving a variety of 
infringing items, the infringement amount is the sum of all 
calculations made for those items under subdivisions (A) and (B). 
For example, if the defendant sold both counterfeit videotapes that 
are identical in quality to the infringed videotapes and obviously 
inferior counterfeit handbags, the infringement amount, for purposes 
of subsection (b)(1), is the sum of the infringement amount 
calculated with respect to the counterfeit videotapes under 
subdivision (A)(i) (i.e., the quantity of the infringing videotapes 
multiplied by the retail value of the infringed videotapes) and the 
infringement amount calculated with respect to the counterfeit 
handbags under subdivision (B) (i.e., the quantity of the infringing 
handbags multiplied by the retail value of the infringing handbags).
    (D) Determination of Retail Value.--For purposes of this 
Application Note, the `retail value' of an infringed item or an 
infringing item usually is the retail price of that item in the 
market in which it is sold.
    3. Pre-Release Infringement.--Subsection (b)(2) applies to the 
distribution of an infringing item before the infringed item is 
commercially released by the copyright or trademark owner. For 
example, if the defendant unlawfully videotaped a film at a movie 
theater, then distributed copies of that videotape before lawful 
copies of the film were commercially available in videotape form, 
the enhancement will apply.
    4. Manufacturing, Importing, and Uploading Enhancement.--With 
respect to uploading, subsection (b)(5) applies only to uploading 
with the intent to enable other persons to download or otherwise 
copy, or have access to, the infringing item. For example, this 
subsection applies in the case of illegally uploading copyrighted 
software to an Internet site, but it does not apply in the case of 
downloading or installing that software on a hard drive on the 
defendant's personal computer.
    5. Application of Sec. 3B1.3.--If the defendant engaged in de-
encryption or circumvented some other technological security measure 
in order to gain initial access to an infringed item, an adjustment 
under Sec. 3B1.3 (Abuse of Position of Trust or Use of Special 
Skill) will apply.
    Background: This guideline treats copyright and trademark 
violations much like theft and fraud. Similar to the sentences for 
theft and fraud offenses, the sentences for defendants convicted of 
intellectual property offenses should reflect the nature and 
magnitude of the pecuniary harm caused by their crimes. Accordingly, 
similar to the loss enhancement in the theft and fraud guidelines, 
the infringement amount in subsection (b)(1) serves as a principal 
factor in determining the offense level for intellectual property 
offenses.
    Subsection (b)(1) implements section 2(g) of the No Electronic 
Theft (NET) Act by using the retail value of the infringed items, 
multiplied by the number of infringing items, to determine the 
pecuniary harm for cases in which use of the retail value of the 
infringed item is a reasonable estimate of that harm. For cases 
referred to in Application Note 2(B), the Commission determined that 
use of the retail value of the infringed item would overstate the 
pecuniary harm or otherwise be impracticable or inappropriate. In 
these types of cases, use of the retail value of the

[[Page 72133]]

infringing item, multiplied by the number of those items, is a more 
reasonable estimate of the resulting pecuniary harm.
    Section 2511 of title 18, United States Code, as amended by the 
Electronic Communications Act of 1986, prohibits the interception of 
satellite transmission for purposes of direct or indirect commercial 
advantage or private financial gain. Such violations are similar to 
copyright offenses and are therefore covered by this guideline.

    Issue for Comment: The Commission has bracketed specific offense 
characteristics (b)(2) through (b)(6) in Option 3 to indicate that any 
or all of these factors, or any combination thereof, could form the 
basis for an enhancement. The Commission specifically invites comments 
on which, if any, of these specific offense characteristics, or 
combination of these specific offense characteristics, should be 
incorporated into the guideline. The Commission also specifically 
invites comment on whether, if the Commission were to adopt either 
Option 1 or Option 2, any or all of these specific offense 
characteristics, or any combination of these specific offense 
characteristics, should be incorporated into the adopted Option.
    The Commission also invites comment on whether, as an alternative 
to proposed specific offense characteristics (b)(2) through (b)(6), the 
factors which form the bases for those specific offense characteristics 
should be expressed as bases for departure from the guideline range.

Proposed Re-Promulgation as Permanent Guideline Amendment

    2. Synopsis of Proposed Amendment: This amendment proposes to re-
promulgate as a permanent amendment the emergency telemarketing fraud 
amendment adopted by the Commission on September 23, 1998. It 
implements the directives to the Commission in section 6 of the 
Telemarketing Fraud Prevention Act of 1998, Pub. L. 105-184 (the 
``Act''), but in a somewhat broader form than that required by the 
directives.
    The Act directs the Commission to provide for ``substantially 
increased penalties'' for telemarketing fraud offenses. It also more 
specifically requires that the guidelines provide ``an additional 
appropriate sentencing enhancement, if the offense involved 
sophisticated means, including but not limited to sophisticated 
concealment efforts, such as perpetrating the offense from outside the 
United States,'' and ``an additional appropriate sentencing enhancement 
for cases in which a large number of vulnerable victims, including but 
not limited to [telemarketing fraud victims over age 55], are affected 
by a fraudulent scheme or schemes.''
    This amendment responds to the directives by building upon the 
amendments to the fraud guideline, Sec. 2F1.1, that were submitted to 
Congress on May 1, 1998. (See Amendment 577 in USSC Guidelines Manual, 
Appendix C Supplement.) The May 1, 1998 amendments added a specific 
offense characteristic for ``mass-marketing.'' Under that amendment, 
the definition of ``mass-marketing'' would include, but not be limited 
to, telemarketing fraud. The May 1, 1998 amendments also added a 
specific offense characteristic for sophisticated concealment.
    This amendment broadens the ``sophisticated concealment'' 
enhancement to cover ``sophisticated means'' of executing or concealing 
a fraud offense. In addition, the amendment increases the enhancement 
under the vulnerable victim guideline, Sec. 3A1.1, for offenses that 
impact a large number of vulnerable victims.
    In designing enhancements that may apply more broadly than the 
Act's above-stated directives minimally require, the Commission acts 
consistently with other directives in the Act (e.g., section 6(c)(4) 
(requiring the Commission to ensure that its implementing amendments 
are reasonably consistent with other relevant directives to the 
Commission and other parts of the sentencing guidelines)) and with its 
basic mandate in sections 991 and 994 of title 28, United States Code 
(e.g., 28 U.S.C. 991(b)(1)(B) (requiring sentencing policies that avoid 
unwarranted disparities among similarly situated defendants)).
    Proposed Amendment: Amendment 587 (See USSC Guidelines Manual, App. 
C Supplement; see also 63 FR 55912 (1998)) is re-promulgated without 
change as follows:
    Section 2F1.1(b), as amended by amendment 577, is further amended 
by striking subdivision (3) and all that follows through the end of the 
subsection and inserting the following:
    ``(3) If the offense was committed through mass-marketing, increase 
by 2 levels.
    (4) If the offense involved (A) a misrepresentation that the 
defendant was acting on behalf of a charitable, educational, religious 
or political organization, or a government agency; or (B) violation of 
any judicial or administrative order, injunction, decree, or process 
not addressed elsewhere in the guidelines, increase by 2 levels. If the 
resulting offense level is less than level 10, increase to level 10.
    (5) If (A) the defendant relocated, or participated in relocating, 
a fraudulent scheme to another jurisdiction to evade law enforcement or 
regulatory officials; (B) a substantial part of a fraudulent scheme was 
committed from outside the United States; or (C) the offense otherwise 
involved sophisticated means, increase by 2 levels. If the resulting 
offense level is less than level 12, increase to level 12.
    (6) If the offense involved (A) the conscious or reckless risk of 
serious bodily injury; or (B) possession of a dangerous weapon 
(including a firearm) in connection with the offense, increase by 2 
levels. If the resulting offense level is less than level 13, increase 
to level 13.
    (7) If the offense--
    (A) Substantially jeopardized the safety and soundness of a 
financial institution; or
    (B) Affected a financial institution and the defendant derived more 
than $1,000,000 in gross receipts from the offense,
increase by 4 levels. If the resulting offense level is less than level 
24, increase to level 24.''.
    The Commentary to Sec. 2F1.1 captioned ``Application Notes'', as 
amended by amendment 577, is further amended by striking Application 
Note 14 and all that follows through the end of the Application Notes 
and inserting the following:
    ``15. For purposes of subsection (b)(5)(B), `United States' means 
each of the 50 states, the District of Columbia, the Commonwealth of 
Puerto Rico, the United States Virgin Islands, Guam, the Northern 
Mariana Islands, and American Samoa.
    For purposes of subsection (b)(5)(C), `sophisticated means' means 
especially complex or especially intricate offense conduct pertaining 
to the execution or concealment of an offense. For example, in a 
telemarketing scheme, locating the main office of the scheme in one 
jurisdiction but locating soliciting operations in another jurisdiction 
would ordinarily indicate sophisticated means. Conduct such as hiding 
assets or transactions, or both, through the use of fictitious 
entities, corporate shells, or offshore bank accounts also ordinarily 
would indicate sophisticated means.
    The enhancement for sophisticated means under subsection (b)(5)(C) 
requires conduct that is significantly more complex or intricate than 
the conduct that may form the basis for an enhancement for more than 
minimal planning under subsection (b)(2)(A).
    If the conduct that forms the basis for an enhancement under 
subsection (b)(5) is the only conduct that forms the basis for an 
adjustment under Sec. 3C1.1

[[Page 72134]]

(Obstruction of Justice), do not apply an adjustment under Sec. 3C1.1.
    16. `Financial institution,' as used in this guideline, is defined 
to include any institution described in 18 U.S.C. 20, 656, 657, 1005-
1007, and 1014; any state or foreign bank, trust company, credit union, 
insurance company, investment company, mutual fund, savings (building 
and loan) association, union or employee pension fund; any health, 
medical or hospital insurance association; brokers and dealers 
registered, or required to be registered, with the Securities and 
Exchange Commission; futures commodity merchants and commodity pool 
operators registered, or required to be registered, with the Commodity 
Futures Trading Commission; and any similar entity, whether or not 
insured by the federal government. `Union or employee pension fund' and 
`any health, medical, or hospital insurance association,' as used 
above, primarily include large pension funds that serve many 
individuals (e.g., pension funds of large national and international 
organizations, unions, and corporations doing substantial interstate 
business), and associations that undertake to provide pension, 
disability, or other benefits (e.g., medical or hospitalization 
insurance) to large numbers of persons.
    17. An offense shall be deemed to have `substantially jeopardized 
the safety and soundness of a financial institution' if, as a 
consequence of the offense, the institution became insolvent; 
substantially reduced benefits to pensioners or insureds; was unable on 
demand to refund fully any deposit, payment, or investment; was so 
depleted of its assets as to be forced to merge with another 
institution in order to continue active operations; or was placed in 
substantial jeopardy of any of the above.
    18. `The defendant derived more than $1,000,000 in gross receipts 
from the offense,' as used in subsection (b)(7)(B), generally means 
that the gross receipts to the defendant individually, rather than to 
all participants, exceeded $1,000,000. `Gross receipts from the 
offense' includes all property, real or personal, tangible or 
intangible, which is obtained directly or indirectly as a result of 
such offense. See 18 U.S.C. 982(a)(4).
    19. If the defendant is convicted under 18 U.S.C. 225 (relating to 
a continuing financial crimes enterprise), the offense level is that 
applicable to the underlying series of offenses comprising the 
`continuing financial crimes enterprise.'
    20. If subsection (b)(7)(A) or (B) applies, there shall be a 
rebuttable presumption that the offense involved `more than minimal 
planning.' ''.
    The Commentary to Sec. 2F1.1 captioned ``Application Notes'', as 
amended by amendment 577, is further amended by redesignating Notes 3 
through 13 as Notes 4 through 14, respectively; and by inserting after 
Note 2 the following new Note 3:
    ``3. `Mass-marketing,' as used in subsection (b)(3), means a plan, 
program, promotion, or campaign that is conducted through solicitation 
by telephone, mail, the Internet, or other means to induce a large 
number of persons to (A) purchase goods or services; (B) participate in 
a contest or sweepstakes; or (C) invest for financial profit. The 
enhancement would apply, for example, if the defendant conducted or 
participated in a telemarketing campaign that solicited a large number 
of individuals to purchase fraudulent life insurance policies.''.
    The Commentary to Sec. 2F1.1 captioned ``Application Notes'' is 
amended in Note 1 by striking ``Sec. 2F1.1(b)(3)'' and inserting 
``Sec. 2F1.1(b)(4)''; in redesignated Note 5 (formerly Note 4), by 
striking ``(b)(3)(A)'' and inserting ``(b)(4)(A)''; and in redesignated 
Note 6 (formerly Note 5), by striking ``(b)(3)(B)'' and inserting 
``(b)(4)(B)''.
    The Commentary to Sec. 2F1.1 captioned ``Background'' is amended by 
inserting after the fifth paragraph the following new paragraph:
    ``Subsection (b)(5) implements, in a broader form, the instruction 
to the Commission in section 6(c)(2) of Public Law 105-184.''.
    Section 3A1.1 is amended by striking subsection (b) in its entirety 
and inserting:
    ``(b)(1) If the defendant knew or should have known that a victim 
of the offense was a vulnerable victim, increase by 2 levels.
    (2) If (A) subdivision (1) applies; and (B) the offense involved a 
large number of vulnerable victims, increase the offense level 
determined under subdivision (1) by 2 additional levels.''.
    The Commentary to Sec. 3A1.1 captioned ``Application Notes'' is 
amended in Note 2 in the first paragraph by striking `` `victim' 
includes any person'' before ``who is'' and inserting `` `vulnerable 
victim' means a person (A)''; and by inserting after ``(Relevant 
Conduct)'' the following:

``; and (B) who is unusually vulnerable due to age, physical or mental 
condition, or who is otherwise particularly susceptible to the criminal 
conduct''.
    The Commentary to Sec. 3A1.1 captioned ``Application Notes'' is 
amended in Note 2 in the second paragraph by striking ``where'' each 
place it appears and inserting ``in which''.
    The Commentary to Sec. 3A1.1 captioned ``Application Notes'' is 
amended in Note 2 in the third paragraph by striking ``offense 
guideline specifically incorporates this factor'' and inserting 
``factor that makes the person a vulnerable victim is incorporated in 
the offense guideline''.
    The Commentary to Sec. 3A1.1 captioned ``Background'' is amended by 
adding at the end the following additional paragraph:
    ``Subsection (b)(2) implements, in a broader form, the instruction 
to the Commission in section 6(c)(3) of Public Law 105-184.''.
    The Commentary to Sec. 2B5.1 captioned ``Application Notes'' is 
amended in Note 1 by inserting ``United States'' before ``Virgin 
Islands''.

[FR Doc. 99-33380 Filed 12-22-99; 8:45 am]
BILLING CODE 2210-40-P; 2211-01-P