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Intellectual property crimes.

I. INTRODUCTION

Owners of intellectual property are able to protect their rights by pursuing civil remedies. Yet the possibility of civil sanctions alone is insufficient to deter violators who steal trade secrets or infringe on others' trademarks, copyrights, or patents.(1) Indeed, some intellectual property thieves view civil damage actions as just another cost of doing business. It has been estimated that the theft of intellectual property rights in the United States cost over $300 billion dollars in 1997 alone, with high technology corporations most frequently targeted.(2)

The lack of deterrence associated with civil mechanisms led the federal government and most states to enact statutes designed to prevent the theft of intellectual property rights. These are often general statutes which can be interpreted to offer protection to the intellectual property at issue. Other statutes are specifically tailored to the type of intellectual property for which protection is sought. These latter provisions are used with increasing frequency to deter and punish perpetrators.

This article examines several areas of intellectual property law under which criminal prosecutions are brought. Section II covers the theft of trade secrets, while Section III discusses trademark counterfeiting. Next, Section IV addresses copyright infringement. Section V examines the new problems raised by online servers, while Section VI looks at patents and Section VII at art crimes. Finally, Section VIII discusses sentencing for intellectual property crimes.

II. THEFT OF TRADE SECRETS

Prior to the enactment of the Economic Espionage Act, addressed in Part A, no federal criminal statute dealt directly with the theft of intangible trade secrets. Parts B through E of this Section will cover alternative statutes federal prosecutors have used in the past, with limited success, to penalize the misappropriation of trade secrets. These include the National Stolen Property Act, the Trade Secrets Act, the Mail and Wire Fraud statutes, and the Racketeer Influenced and Corrupt Organizations Act. Finally, Part F describes state provisions used to combat trade secret theft.

A. Economic Espionage Act of 1996

In October 1996, discouraged by the failure of civil remedies to prevent trade secret theft, the inability of prosecutors to effectively use other criminal statutes, and the frequent efforts by foreign governments to obtain trade secrets from American companies, Congress made the theft of trade secrets a federal crime with the enactment of the Economic Espionage Act ("EEA").(3) The EEA established two criminal offenses under which governments can prosecute trade secret theft. The first offense, "economic espionage," arises only when the theft benefits a foreign government.(4) This carries higher penalties than the second offense, "theft of trade secrets," which is broader and generally concerns all trade secret theft.(5)

1. Definition of Trade Secret

The EEA defines trade secrets to include "all forms and types of financial, business, scientific, technical, economic, or engineering information ... whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing.... "(6)Although substantially similar to the trade secret definition in the civil Uniform Trade Secrets Act ("UTSA"),(7) the definition in the EEA is broader in an effort to modernize the law and "keep pace with growing technology, especially in the computer and information storage sectors."(8)

In order to protect property that is considered a trade secret, the owner of the property must take reasonable measures to keep it secret.(9) Additionally, the economic value of the information must be derived from the general public's lack of knowledge about it or the public's inability to readily access it through proper means.(10) This provision imposes a higher standard of self-protection on the owner of a trade secret than on owners of other types of property.(11)

2. Tangibility

Another important provision of the EEA is its broad definition of property: "tangible or intangible, and whether or how stored."(12) This implies that information stolen in electronic form or merely memorized falls under the definition of trade secret theft.(13) As discussed in later sections, this is the first time that federal legislation has specifically protected intangible property without additional requirements, such as a use of the mail or a wire transmission.

The EEA's legislative history indicates that the provision covering memorized information was not intended to include the general knowledge and skill learned on a job when an employee leaves a company and moves to another in the same or a similar field.(14)

3. Intent and Method of Misappropriation

Under the first offense, economic espionage, the perpetrator must intend or know that the "offense will benefit any foreign government, foreign instrumentality, or foreign agent."(15)

When trade secret theft does not benefit a foreign government, provisions of the second offense apply. Under the EEA, "theft of trade secrets" requires specific intent and methods of misappropriation. Section 1832 states broadly that any unauthorized possession of a trade secret with intent to injure another violates the act.(16)

The EEA intent requirements include "knowingly" intending "to convert a trade secret," while "knowing that the offense will, injure any owner of that trade secret."(17) Consequently, the scope of the EEA is somewhat more limited than its civil counterpart, the UTSA, which does not require that the "defendant be aware of the trade secret."(18)

On the other hand, the EEA's definition of "theft" of a trade secret is broader than the UTSA's, which provides simply that theft is misappropriation by improper means.(19) The EEA definition considers the mere receipt of a trade secret a violation.(20)

4. Applicability to Conduct Abroad

Another expansive provision of the EEA is [sections] 1837, which allows the government to prosecute conduct that occurs overseas if the party involved in the activity is bound by United States federal law or if an "act in furtherance of the offense was committed in the United States."(21) The first provision in [sections] 1837 extends the reach of the federal government to penalize the actions of United States citizens and corporations abroad, presumably even when there is no other nexus with the United States.(22) The second provision enables the federal government to pursue trade secret theft outside of the country as long as some part of the activity, such as a phone call, was connected to the United States.(23)

At the same time, [sections] 1833 narrows the scope of the act by providing two exceptions relating to law enforcement and other governmental activities.(24) The first exception allows the government to continue an otherwise lawful "investigative, protective, or intelligence activity."(25) The second exception permits the reporting of suspected criminal activity to law enforcement.(26)

5. Prosecutions Under the EEA

Because the EEA is a new law, the government has only begun to prosecute violators. Some commentators have attributed the slow enforcement to the tension between criminal law and the generally civil nature and history of intellectual property protection.(27) Commentators also speculate that the government will wait for cases where "the blatancy of the theft and the potential ease of conviction" are obvious.(28)

The government has brought at least 13 criminal actions under the EEA. All are fairly straightforward, stemming from FBI stings, and were filed under [sections] 1832.(29) In June 1997, the FBI in Philadelphia charged two Taiwanese nationals with attempting to steal trade secrets involving Taxol, a cancer-fighting drug produced by Bristol-Myers Squibb Company.(30) According to the FBI, these arrests are believed to be the first two brought under the EEA involving an international corporation.(31) This case has led to the only judicial decision under the EEA.(32) In United States v. Hsu, the Third Circuit held in an interlocutory appeal that impossibility was not a defense to attempted trade secret theft under [sections] 1832(a)(4) because the defendant's culpability in an attempt charge "depends only on 'the circumstances as he believes them to be,' not as they really are."(33)

Other reported cases filed under the EEA involve the theft of PPG Industries' glass-making process,(34) a breast cancer treatment called Taximofen,(35) attempted theft of future razor systems from the Gillette Company,(36) theft of a proprietary software program developed by Deloitte-Touche,(37) and the attempted sale of marketing plans and subscription lists to a rival newspaper.(38) Lastly, in September 1997, the FBI in Cleveland arrested a Taiwanese businessman and his daughter in connection with the theft of trade secrets from the Avery Dennison Corporation relating to formulations for self-adhesive products, initially valued at $50-60 million.(39)

B. National Stolen Property Act

The National Stolen Property Act ("NSPA")(40) provides criminal sanctions for any person who "transports, transmits, or transfers in interstate or foreign commerce any goods, wares, merchandise, securities or money, of the value of $5,000 or more, knowing the same to have been stolen, converted or taken by fraud...."(41) Although the NSPA was not designed or intended to apply to trade secret theft,(42) the federal courts have held that under certain circumstances the NSPA is applicable to the theft of tangible property containing trade secrets.(43)

1. Transported in Interstate or Foreign Commerce

To fall within the scope of the NSPA, allegedly stolen trade secrets must be transported or transferred in interstate or foreign commerce.(44) This requirement exists because Congress enacted the statute under the authority of the commerce clause. The purpose of the statute was to combat theft across state and foreign boundaries, previously unactionable by individual state and foreign governments.(45) The prosecution must also prove that the stolen item was physically transported; it is not enough for the prosecution to establish the presence of a stolen trade secret in a state or country other than its original location.(46)

2. Goods, Wares or Merchandise

In United States v. Seagraves,(47) the Third Circuit defined "goods, wares or merchandise" broadly as "such personal property or chattels as are ordinarily a subject of commerce."(48) Accordingly, the Seagraves court held that stolen maps were the subjects of commerce, albeit of a specialized nature, and were therefore "goods, wares or merchandise" within the terms of the NSPA.(49) Courts have also held that trade secrets must be stolen while in a tangible form or in conjunction with tangible goods.(50) A violation cannot be established if, for example, a thief merely memorizes a secret formula and then writes it down after crossing a state or foreign boundary.(51)

3. Minimum Value 0f $5,000

The intent of the NSPA is to address only the theft of items having substantial market value.(52) Courts have taken a variety of approaches in determining the "value" of trade secrets. Some courts have looked for an actual market for the products embodying the stolen trade secrets to determine their value.(53) Absent a market, courts have looked for "any reasonable method" of valuation.(54) The amount of time and money defendants invested in the misappropriation scheme is one alternative to market value.(55) Another alternative is using the black market price.(56)

4. Stolen, Convened, or Taken by Fraud

Finally, the NSPA requires a physical theft: the "goods, wares, [or] merchandise" must be physically "stolen, converted or taken by fraud."(57)

5. Knowledge that Items Were Stolen

Possession of stolen trade secrets by a defendant is not sufficient to place a potential transgressor of [sections] 2314 within the boundaries of the NSPA. The government must introduce evidence establishing that the defendant knew the items were stolen.(58) The defendant's knowledge of the illegal origin of the trade secret may be inferred from the defendant's behavior.(59)

6. Shortcomings of the NSPA

With the rapid growth of computerized digital technologies, prosecutors often have difficulties obtaining convictions under the NSPA. The intangible nature of many trade secrets has prevented the government from using the NSPA to prosecute trade secret theft because the statute is limited to "goods, wares, merchandise, securities or money" which are tangible property.(60)

In United States v. Brown,(61) the Tenth Circuit considered a prosecution under the NSPA arising out of the alleged theft of a computer program and its source code.(62) Although the stolen program was recovered at the defendant's residence, the prosecution could not prove that the software had been physically removed from plaintiff's place of business.(63) The intangible properties of computer programs led the court to state "for section 2314 to apply there must be some tangible item taken, however insignificant or valueless it may be, absent the intangible component."(64) Accordingly, the Tenth Circuit held that the "essential ingredient of the statute [[sections] 2314]--the involvement of physical `goods, wares, [or] merchandise' that were themselves `stolen, converted or taken by fraud'--was missing...."(65)

C. Trade Secrets Act

Prior to the EEA, the only federal statute that specifically addressed the theft of trade secrets was the Trade Secrets Act, which prohibits the unauthorized disclosure of confidential information by government employees.(66) Because this legislation does not apply to private sector employees, federal prosecutors more often mined to the NSPA and Mail and Wire Fraud statutes for criminal misappropriation of trade secrets.(67)

D. Mail and Wire Fraud Statutes

The mail and wire fraud statutes(68) provide criminal sanctions for using or attempting to use the mails(69)(including private delivery services) and wire services to perpetrate fraud.(70) Unlike the NSPA, these statutes may be applied to the theft of intangible rights,(71) such as trade secrets.(72)

Violation of these statutes requires neither proof that the scheme's victims were in fact defrauded,(73) nor proof that the defendant gained anything through the scheme.(74) Rather, violations turn on actual intent to harm the victim.(75)

In some cases, appellate courts have upheld convictions under the mail and wire fraud statutes even when there has been no violation of the NSPA.(76) This resulted from the statutes' broader definition of property as compared to the NSPA's definition of "goods, wares and merchandise."(77) However, under the mail and wire fraud statutes, use of the mail or wire is necessary for there to be misappropriation.(78)

E. Racketeer Influenced and Corrupt Organizations Act

Criminal sanctions for theft of trade secrets are also available under the Racketeer Influenced and Corrupt Organizations Act ("RICO").(79) Although many cases brought under RICO are civil actions,(80) the predicate acts necessary to sustain a RICO claim are violations of criminal law. Consequently, the elements of civil and criminal RICO actions are similar. The definition of racketeering activity applicable to the theft of trade secrets includes mail fraud,(81) wire fraud,(82) activity prohibited by the NSPA,(83) and the receipt of stolen property.(84)

Courts faced with trade secret theft charges have reached different conclusions on the definition of a "pattern of racketeering activity" within the meaning of the RICO statute.(85) One district court held that the definition is met by a single scheme of trade secrets misappropriation if there are sufficient allegations of concerted activity directed toward a goal of injuring the plaintiff.(86) In that case, the plaintiff alleged that the defendant's scheme to misappropriate the plaintiff's trade secrets included multiple mailings and telephone conversations, in violation of the mail fraud and wire fraud statutes.(87) The court held this scheme established a pattern of racketeering activity.(88)

In contrast, another district court held an isolated criminal episode, though accomplished through several fraudulent acts, does not evidence "threat of continuing criminal activity" so as to give rise to pattern of racketeering activity within meaning of RICO.(89)

F. State Law Provisions

In addition to the various federal statutes criminalizing the misappropriation of trade secrets, all states have enacted criminal statutes applicable to the theft, use, or disclosure of another's trade secrets.(90) These state statutes vary greatly in their scope and sanctions. Some specifically address trade secrets,(91) while others have been interpreted to cover trade secrets despite no explicit reference to them.(92) However, the scope of protection afforded by some state statutes is, like the scope of the NSPA, limited because they apply only to the theft of tangible items.(93)

III. TRADEMARK COUNTERFEITING

Over the past several decades, the theft of trademarks, the symbols or names associated with brand names and products, has become an increasingly lucrative activity for criminals. It has also had an equally significant yet opposite effect on the economy, as companies lose an estimated $20 billion a year to criminal commercial trademark counterfeiting.(94)

This Section will cover the various statutes that the government uses to protect companies' investments in developing brand names and trademarks. Part A addresses the Trademark Counterfeiting Act of 1984, including its similarities to and differences from its civil counterpart, the Lanham Act. It also reviews defenses to charges of trademark counterfeiting and discusses the FBI's recent campaign against trademark counterfeiting. Part B covers the trademark counterfeiting provisions of the Racketeer Influenced and Corrupt Organizations Act and of the Money Laundering Act.

A. Trademark Counterfeiting Act

The Trademark Counterfeiting Act ("TCA") criminalizes the intentional trafficking in counterfeit goods or services.(95) To prove a violation of 18 U.S.C. [sections] 2320, the government must establish that: (1) the defendant trafficked or attempted to traffic in goods or services; (2) such trafficking, or the attempt to traffic, was intentional; (3) the defendant used a counterfeit mark on or in connection with such goods or services; and (4) the defendant knew that the mark so used was counterfeit.(96) Counterfeit goods include those that have a mark identical to or substantially indistinguishable from a registered trademark.(97) The government need not prove that the defendant had a criminal intent.(98) The government may also prosecute conspiracies to violate the statute.(99)

1. Defenses

The TCA incorporates the defenses of its civil counterpart, the Lanham Act,(100) These defenses include laches, unclean hands, fraud in obtaining trademark registration, use of mark in violation of antitrust laws, and invalid trademark.(101)

2. Penalties

Under the TCA, an individual who intentionally traffics in goods or services and knowingly uses a counterfeit mark shall be fined no more than $2,000,000 or imprisoned not more than ten years, or both.(102) For organizations, the fine shall not be more than $5,000,000.(103)

3. Operation Counter Copy

In May 1997, the U.S. Department of Justice ("DOJ") announced `the results of a nationwide crack-down on criminal trademark and copyright fraud--"Operation Counter Copy"--which commenced in October 1996.(104) This operation netted thirty-five indictments, including three convictions and eight guilty pleas of individuals for conspiracy and trafficking in trademark infringing products.(105) The DOJ initiated "Operation Counter Copy" as part of its overall "increased effort to address criminal violations of intellectual property rights."(106)

B. RICO and Money Laundering Act

As with theft of trade secrets, trademark counterfeiting is also illegal under the Racketeer Influenced and Corrupt Organizations ("RICO") and money laundering tatutes. In 1994, Congress added trademark counterfeiting to the list of unlawful activities under the money laundering statute.(107) The Anticounterfeiting Consumer Protection Act of 1996 made trademark and copyright counterfeiting a predicate offense under RICO.(108) Due to frustration with the usefulness of the TCA in providing remedies to trademark counterfeiting, Congress amended the RICO statute to enable the government to counter organized criminal activity as a whole "rather than merely react to each crime the organization commits."(109)

1. Penalties

Penalties for violations of the RICO and money laundering statutes are significantly more severe than those under the TCA.(110) While the aforementioned amendments do not expand the definition of conduct that is illegal under the TCA and do not necessarily increase penalties associated with that conduct, their provisions do increase penalties when used to prosecute an organized crime.(111)

Under RICO, fines can be up to twice the gross profits or other proceeds of the activity.(112) Similarly, the penalty for a money laundering violation is a maximum sentence of twenty years and a maximum fine of $500,000 or twice the amount involved in the transaction, whichever is greater.(113)

In addition to fines and imprisonment, the amended RICO statute allows law enforcement officials, including customs agents, to seize counterfeit goods and any "personal or real estate assets connected with the criminal enterprise." (114)

IV. COPYRIGHT

Part A of this section discusses the Copyright Act, emphasizing the elements of the criminal copyright infringement offense and affirmative defenses and the effects of reverse engineering. Parts B through E describe the application of the National Stolen Property Act, mail and wire fraud statutes, the Racketeer Influenced and Corrupt Organizations Act, and the money laundering statutes to criminal copyright infringement. Part F discusses pending legislation to extend copyright protection to computer databases and other collections of information.

A. Copyright Act

Congress' exclusive power to regulate copyright law is grounded in the Constitution.(115) Criminal copyright infringement, first introduced into federal copyright law in 1897, is distinguished from civil violations by the requirement that the conduct be willful and undertaken for profit.(116) Since 1897, the criminal copyright statute has been frequently amended as Congress has attempted to strengthen it and broaden its scope.(117) The Copyright Act of 1976 relaxed the mens rea requirement for criminal copyright infringement by requiring only that the infringement be undertaken willfully and for purposes of commercial advantage or private financial gain.(118) This lower threshold eases the burden of proving that the transgressor acted "for profit." In 1982, Congress increased the sanctions for criminal infringement, codifying stricter fines for criminal infringement in a separate statute.(119)

Enacted by Congress in October 1992, the Copyright Felony Act(120) responded primarily to the growing problem of large-scale computer software piracy.(121) Prior to its passage, only unauthorized copying of sound recordings, motion pictures, or audiovisual works was a federal felony.(122) The Act amended 18 U.S.C. [sections] 2319 by broadening its coverage to protect all copyrighted works and lowering the numerical and monetary thresholds for felony sanctions.(123) The mens rea requirement remained unchanged under the 1992 Act, requiring the government to prove that the infringer's conduct was both willful and for purposes of commercial advantage or private financial gain.(124)

Finally, in December, 1997, the "No Electronic Theft (NET) Act" was enacted.(125) This Act removes the strict financial gain requirement; the government eed only prove either that the infringer acted for financial gain, or that she reproduced or distributed one or more copies of copyrighted works that have a total retail value of $1,000.(126) Thus, the criminal copyright statute now reaches those infringers who act solely to harm another or for nonfinancial gratification.(127)

Because a copyright cannot exist before an expression is captured in a fixed, tangible medium, musical or dramatic performances may not be protected by copyright until they are recorded. An artist's interest in his performance is protected against unauthorized recording by 18 U.S.C. [sections] 2319A. This section, added in December 1994, provides for both fines and imprisonment for the recording, reproduction, transmission, and distribution (whether for sale or not) of live musical performances.(128)

1. Elements of the Offense

The government has the burden of proving three elements in a criminal prosecution for copyright infringement under 17 U.S.C. [sections] 506: (1) that a copyright has been infringed upon; (2) that the violation was performed willfully; and (3) that the infringement was for purposes of commercial advantage or private financial gain, or that the infringer reproduced or distributed, during any 180-day period, one or more copies or phonorecords of one or more copyrighted works, with a total retail value of more than $1,000.(129) The elements of a [sections] 2319A violation are similar.(130)

a. Infringement

As in civil cases, the first element--copyright infringement--can be proven by direct evidence, if available,(131) or by indirect evidence showing that the defendant had access to the copyrighted work and that the alleged copy is "substantially similar" to the original work.(132) The substantial similarity test is a two step analysis which requires: (1) a showing of substantial similarity in the basic ideas involved, established by focusing on specific "extrinsic" criteria, such as the type of work involved, the materials used, the subject matter, and the setting for the subject; and (2) a showing that the defendant's alleged copy expresses the same "intrinsic" substance and value as the original work.(133)

As an alternative to the substantial similarity test, courts may employ the "virtual identity" standard, or they may apply both. Whereas the substantial similarity test allows the potentially infringing work to be broken down into protectable and unprotectable elements, which will be compared with the original work for substantial similarity, the virtual identity test looks at the two works as a whole to determine if they are virtually identical.(134)

In McCulloch v. Albert E. Price, Inc.,(135) the Ninth Circuit held that it is not necessary under the substantial similarity test to determine the scope of copyright protection or to identify the idea behind a copyright holder's work.(136) The McCulloch court also decided that although the district court did not expressly follow the prevailing two-prong substantial similarity test,(137) similarity of ideas and expressions among the works was sufficient to support a finding of substantial similarity, where the lower court found that similarity "confusing."(138) Some courts allow the allegedly infringing work to be separated from the noninfringing work by filtering out copyright-protected from non-protected components.(139) Finally, the copyright infringement element may be established even though the person distributing the infringing work did not produce the copies herself.(140)

b. Intent

The second element of the criminal copyright offense is intent. A majority of the courts have interpreted the term "willfully" to mean that the government must show that the defendant specifically intended to violate the copyright law.(141) The Second and Ninth Circuits have taken the minority view, holding that "willfulness" requires only an intent to copy, not an intent to infringe.

c. Financial Gain/Threshold Violation

The third element of the criminal copyright offense is intent to profit. The Seventh Circuit has held that a defendant need not actually realize commercial advantage or private financial gain for a court to find this element of the offense; it is enough that the defendant commit the violation for the purpose of financial gain.(143) The aforementioned December 1997 amendments to 17 U.S.C. [sections] 506(a) have removed the financial gain requirement, by allowing the government to prove either financial gain or that one or more copies were reproduced or distributed with a total retail value of more than $1,000; thus, the infringer need not have intent to profit to be found guilty.(144)

2. Defenses

A common statutory defense to copyright infringement is the "first sale" doctrine.(145) According to the doctrine, upon sale, the author conveys title to the particular copyrighted work and abolishes his right to restrict subsequent sales of the work.(146) The Third Circuit has held that infringing goods do not have to be made in the United States for the first sale doctrine to apply.(147) However, the Ninth Circuit subsequently held that a defendant could not use the first sale doctrine as a statutory defense to a copyright infringement charge for importation of infringing goods.(148) The Supreme Court granted certiorari to resolve this split in the circuits, and its unanimous March 1998 opinion in Quality King Distribs., Inc. v. L'anza Research Int'l, Inc.(149) decisively rejected the Ninth Circuit's approach, holding that the first sale defense precluded assertions by a copyright owner that the re-importation of its goods from overseas markets constituted copyright infringement.(150)

Other defenses include fair use, parody and scenes a faire. Fair use considers the nature of both the infringing work and the work infringed against, as well as the purpose and economic impact of the specific use.(151) A defense of fair use as parody(152) considers almost exclusively the expressive intent of the infringing work to determine if the unique message could have been adequately conveyed through a less intrusive means.(153) A scenes a faire defense(154) relies on the fact that the infringing elements are so common or integral to the sort of work being produced that it is impossible to create works in the same category without those elements and therefore they may not be protected by copyright.(155)

3. Reverse Engineering

Because only the expression of an idea, and not the idea itself, may be protected under copyright, a copy made for the purposes of reverse engineering may represent a fair use exception to the copyright doctrine. Reverse engineering is the process, now most often applied to software, where a protected work is broken down to its component and nonprotected parts, from which a similar, competitive but noncopy product may be created.(156) When determining whether nonliteral elements of computer programs are substantially similar in copyright infringement cases, the court must first break down the allegedly infringing program into its constituent structural parts and isolate each level of abstraction contained within that structure, sift protectable expression from nonprotectable material, and then compare the material structure of allegedly infringing program.(157) While this is more often at issue in trade secret violations, the doctrine has been applied to copyright violations in software cases.

B. National Stolen Property Act

In Dowling v. United States,(159) the Supreme Court held that the National Stolen Property Act(160) does not prohibit the interstate transportation of goods infringing on another's copyright.(161) Because there had been no actual physical removal or theft of the property, the Court held that the Act's requirement that the goods be "stolen, converted or taken by fraud" was not met. The decision overruled a long line of cases extending the protection of the Act to copyrighted goods.(162)

C. Mail and Wire Fraud Statutes

The mail and wire fraud statutes(163) impose criminal penalties on those who utilize the mails or wires to defraud others through copyright infringement.(164) To establish a violation of either statute, the government must meet the same criteria as set out in Section II.D. of this Article. Additionally, one district court has held that federal copyright law does "not necessarily preempt other proprietary rights."(165) Because the defendants in that prosecution would not profit from their infringement until transmission by wire had occurred, this court held that remedies were not limited to those provided by the copyright statute and that prosecution under the wire fraud statute was acceptable.(166)

D. Racketeer Influenced and Corrupt Organizations Act

As with theft of trade secrets and trademark counterfeiting, RICO(167) claims can be brought for copyright infringement if the infringing acts continue over a period of time and relate to each other in a common plan created by the violators with the intent to defraud.(168) The Anticounterfeiting Consumer Protection Act of 1996 has made copyright counterfeiting a racketeering activity under RICO.(169)

E. Money Laundering Act

Section 1956 of the money laundering statute defines money laundering and includes the receipt of proceeds from trafficking in counterfeit goods or goods infringing copyright as specified unlawful activities.(170)

F. The Database Protection Bill

In October 1997, Rep. Howard Coble (R.-N.C.) introduced the Collections of Information Antipiracy Act,(171) which would provide criminal penalties for the use of all or part of a "collection of information gathered, organized, or maintained by another person through the investment of substantial monetary or other resources."(172) A violation of the proposed law would require willful action, that the act be undertaken for commercial or financial advantage--whether direct or indirect--and that the perpetrator cause loss or damage to the compiler of the information.(173) The Act passed the House on May 19, 1998.(174) The Act was introduced into the Senate on July 10, 1998, but was not enacted.(175)

Similar legislation introduced in the 104th Congress(176) was defeated and was criticized for extending copyright protection to hitherto uncopyrightable databases.(177) Even though the current bill was not ultimately enacted, it might serve as a model for future legislation.(178)

V. ONLINE SERVERS: CRIMINAL VIOLATIONS OF THE COPYRIGHT FELONY ACT

Part A of this section outlines applications of `the Copyright Act to on-line activities. It then addresses applications of the first-sale doctrine to file transfers in cyberspace. Part B discusses criminal liability by focusing on the dual requirements of intent and commercial advantage/financial gain. Finally, Part C addresses Warez Sites and Internet Service Providers' liability for activities on their networks.

A criminal violation of the Copyright Act occurs when one willfully reproduces or publicly distributes any kind of copyrighted work.(179) The Copyright Act of 1976(180) protects the use of the text files,(181) image files,(182) and sound files(183) on the Internet.(184) Criminal copyright infringement that (1) is facilitated by or achieved through the Internet and (2) meets the statutorily prescribed number of copies or dollar value may lead to felony prosecution.(185) Systematic, unauthorized trading in copyrighted works on the Internet--whether sound, picture, or text files, or unlicensed software distribution--potentially qualifies as trafficking in counterfeit works. (186)

The protection that the 1976 Copyright Act affords digital works is in dispute. Commentators have argued that several areas of the Act should be amended in light of the growing use of cyberspace.(187) Two issues which are particularly problematic in the context of cyberspace are addressed here: the "first sale doctrine" exception, and the statutory requirement that criminal liability be based on findings of intent and commercial or financial gain.

A. The Internet and the First Sale Doctrine

The first sale doctrine allows a copyright holder to legally sell or give away her copy of the work.(188) Literally applied to file transfers in cyberspace, the doctrine arguably implies that a person who legally downloads(189) a file copy to her own computer can freely redistribute that copy, whether or not she assesses a fee, to anyone else.(190) The problem attending such cyberspace redistribution lies in the ability of the first owner to retain a copy of the file she transfers. The argument is that eventually the copyrighted item will be so widely and freely available, and the demand will fall so low, that the owner will no longer benefit financially from her copyrighted work. In response, others argue that the first sale doctrine should not apply to the Internet at all.(191) Currently, the unauthorized reproduction or public distribution of any kind of copyrighted work can result in a felony prosecution.(192)

B. Criminal Liability

1. The Intent Requirement

Criminal liability for copyright infringement is predicated on a finding that the alleged perpetrator acted willfully.(193) The cyberspace context complicates the prosecutor's job because the defendant can convincingly argue an unknowing contribution to or commission of an offense.(194) The expansion of copyright law to address the Internet has yielded civil cases involving allegations of copyright infringement directed against the system operator ("Sysop")(195) or the bulletin board service ("BBS").(196) Although the criminal section of the Copyright Act does not immunize on-line providers from criminal liability for either direct(197) or contributory copyright infringement,(198) to date there have been no successful criminal copyright prosecutions of system providers.

The most heated debate involving service provider liability surrounds civil offenses. Because civil liability does not require that a provider willfully intended to commit or contribute to the infringement, the question arises whether an entity that merely maintains the network should be held liable.(199) In Religious Technology Center v. Netcom On-Line Communication Service, Inc.,(200) the district court held that a BBS service provider could not be held directly or vicariously liable for civil copyright infringement committed by a subscriber.(201) The Netcom court reasoned that, although copyright infringement is governed by strict liability, implicating a server irrespective of any intervention on its part would lead to unreasonable liability.(202)

2. The Commercial Advantage/Financial Gain Requirement

The "commercial advantage" or "financial gain" requirement for a finding of criminal copyright liability has hitherto hindered prosecutors.(203) The leading case demonstrating this problem is United States v. LaMacchia.(204) Even though defendant David LaMacchia set up a secret bulletin board and distributed unauthorized copies of commercially published, copyrighted software, he escaped criminal liability because he neither sought nor received financial or commercial gain from his actions.(205)

In 1997, Congress enacted the aforementioned No Electronic Theft ("NET") Act, which expressly amended 17 U.S.C. [sections] 506(a) to provide that the government can prove either financial gain or that one or more copies or phonorecords of one or more copyrighted works were reproduced or distributed during any 180-day period, provided that the copies have a total retail value exceeding $1,000.(206) This legislation also changed the statute of limitations from three years to five years, thus broadening the scope of its protection.(207)

C. Warez Sites and Internet Service Provider Liability

Warez Sites are anonymous, often short-lived file-transfer protocol ("FTP") sites that exist solely to disseminate unlicensed copies of software and/or passwords for pirate software.(208) Warez sites may be unauthorized use of server space but are not usually maintained for profit or malicious purposes.(209) Any user of the Internet, Usenet or a BBS who is able to log on before all available lines are occupied can download a full, unencrypted, and unlicensed version of new software.

At the December 1996 Geneva meeting of the World Intellectual Property Organization ("WIPO"), draft treaty provisions creating liability for Internet Service Providers ("ISPs") and Sysops were almost unanimously rejected.(210) Partly in response to the debate over those provisions, and partly in response to Netcom,(211) Congress passed the On-Line Copyright Infringement Liability Limitation Act(212) in October of 1998 as part of a larger bill. This law protects ISPs and Sysops from monetary, injunctive or equitable relief for "liability relating to material on-line" if such persons merely provide the server space for the infringing material and neither control nor endorse the infringing material.(213)

In general, the newly created 17 U.S.C. [sections] 512 exempts a service provider(214) from liability for monetary, injunctive or other equitable relief for copyright infringement by reason of the provider's transmitting, routing, or providing a connection for such material, or temporarily storing such material in the course of such a transmission, routing, or connection.(215) The provider remains exempt from liability for copyright infringement so long as the provider has no "actual knowledge" and is not aware of information indicating that the material is infringing, and such provider "does not receive a financial benefit directly attributable to the infringing activity."(216) Although the law does not require a provider to monitor or otherwise seek out information indicating infringement, the law does require that a provider, upon obtaining such information, expediently remove, or disable access to, such material.(217) Those who knowingly, materially misrepresent that material is infringing, or that material was removed or disabled by mistake or misrepresented are liable for damages.(218) Where a provider does remove or disable access to such material in "good faith," or based on circumstances "from which infringing activity is apparent, regardless of whether the material is ultimately determined to be infringing," it will generally(219) not be liable.(220) The law also specifies conditions under which limitations on liability of nonprofit educational institutions apply,(221) enables a copyright owner to request a subpoena be issued to a service provider for identification of an alleged infringer,(222) and describes conditions under which a court may grant injunctive relief with respect to service providers.(223)

VI. PATENT

This section is divided into three parts. Part A discusses criminal liability for false patent marking. Part B addresses counterfeiting and forging of letters patent. Finally, Part C applies the National Stolen Property Act to patent infringement.

A. False Marking

While most federal remedies for patent misuse are civil, the Patent Act does establish criminal liability for infringement.(224) The D.C. Circuit has held that while penal in nature, 35 U.S.C. [sections] 292 is not a criminal statute.(225) False marking, however, can be a criminal offense and may be manifested in several ways by using: (1) the name or any imitation of the name of the patentee; (2) the patent number; or (3) the words "patent" or "patentee."(226) Additionally, the use of the word "patent," or any word or number indicating that the item is patented, in connection with an unpatented item violates this statute, as does the use of the words "patent applied for," "patent pending," or any other words falsely conveying the status of a patent.(227) In order to prove any of the above violations, deceitful intent of the defendant must be shown.(228)

B. Counterfeiting or Forging Letters Patent

Letters Patent are the display of information, on the item, that the government has given the manufacturer the right to exclude others from making that item. The Letters Patent statute(229) imposes criminal sanctions on persons forging, counterfeiting or altering any letters patent, as well as knowingly passing, uttering, or publishing as genuine, any such letters patent.(230)

C. National Stolen Property Act

In addition to excluding interstate transportation of goods infringing on another's copyright from the coverage of the National Stolen Property Act,(231) Dowling v. United States(232) implied, and has been interpreted to mean, that the Act also does not apply to the interstate transportation of goods infringing on patents.(233) Since patent infringement, like copyright infringement, does not involve a physical taking, the Supreme Court took a literal view of the Act's requirement that the copyrighted goods in dispute be "stolen, converted or taken by fraud."(234)

VII. ART CRIMES

Art crime(235) has become a booming multi-billion dollar industry(236)--third only to the illegal drug smuggling and arms trading markets.(237) Crimes span simple theft and vandalism,(238) to forgery,(239) money laundering,(240) and various forms of fraud.

White collar art criminals act as gallery or auction house dealers,(241) museum directors or curators,(242) and collectors. Even artists may engage in tactics facilitating subsequent white collar crime.(243) An appraiser may refuse to authenticate a legitimate artwork as part of a conspiracy to drive up the value of the remaining stock.(244) These perpetrators use their positions of power or privilege to commit non-violent crimes which often require an advanced level of education and skill.(245)

Several obstacles to detection of art crimes exist. Collectors may often be hesitant to report fraud; swindled buyers may fear embarrassment or unwelcome attention by thieves and IRS agents, continue the deception in order to resell the piece, or balk at the threat to the legitimacy of the remaining pieces in their collection.(246) The complexity and expense of accurate authentication also impedes detection.(247)

In addition, many art crimes are easy to perpetrate.(248) Novice collectors are often willing to rely on a dealer's reputation instead of researching their purchases which encourages and rewards art crime.(249)

The international art community(250) has welcomed several recent innovations in publicizing art theft,(251) tracing provenance,(252) and registering works of art,(253) but a lack of effective legislation has hampered attempts at effective containment.(254) The remainder of this Section examines existing federal and state laws that have met with limited success in combating art crimes.

Part A addresses the federal measures applied to art crime prosecutions, specifically the Theft of Major Artwork Act, Mail and Wire Fraud Statutes, the Copyright Felony Act, and compliance with UNESCO and UNIDROIT treaties. Part B reviews state art crime prosecutions under larceny and forgery laws, extended to protect art and antiquities.

A. Federal Statutes

1. Theft of Major Artwork Act

The Theft of Major Artwork Act(255) specifically targets criminals that have stolen or fraudulently obtained "any object of cultural heritage"(256) from a "museum."(257) The Act also penalizes possession of an object known to be stolen or fraudulently obtained.(258) The statute of limitations for returning an indictment or filing an information extends to twenty years after commission of the art theft(259) in order to compensate for the often delayed detection of such crimes and the unique difficulties of recovering stolen works.(260) The first reported charge under this statute occurred in January 1998, when the FBI in Philadelphia charged two defendants for the stealing over two hundred relics from the Historical Society of Pennsylvania.(261) The Act was most recently used to prosecute thefts from the New York Public Library for the Performing Arts.(262)

2. Mail and Wire Fraud Statutes

United States v. Center Art Gallery-Hawaii(263) exemplifies the successful prosecution of art crime using mail and wire fraud statutes.(264) In this case, the gallery and its two owners were each convicted(265) for activities involving the largest art fraud ring in history.(266) The defendants, however, were not prosecuted for the sale of forged works of art, nor for their false appraisals, but rather for mailing false authentication certificates to customers and soliciting further business over the telephone in violation of mail and wire fraud statutes.(267)

In United States v. Burke,(268) four owners and representatives of Manhattan's Barclay Gallery were each charged and convicted of all(269) twenty-two counts of mail fraud and twenty-eight counts of wire fraud; the gallery "allegedly used high-pressure telephone sales pitches" to perpetrate its scheme.(270) Despite singular prosecutorial success,(271) the requisite demonstration of criminal intent inhibits widescale utilization of mail and wire fraud statutes to punish art crime.

3. Copyright Felony Act

A stringent mens rea requirement similarly limits the usefulness and success of art crime prosecutions pursued under the Copyright Felony Act. The statute protects only unpublished works and works not in the public domain, leaving many older works unprotected.(272) Many forgeries do not involve copying.(273)

4. UNESCO and UNIDROIT: Enforcement by Treaties

In 1970, the United Nations Educational, Scientific, and Cultural Organization ("UNESCO") adopted the "Convention on Cultural Property Implementation,"(274) ratified by the United States in 1983.(275) The treaty intends to protect the "cultural patrimony" of countries "from the pillage of archaeological or ethnological materials" by providing import restrictions for such objects.(276) The United States established the "Cultural Property Advisory Committee"(277) which has led to restrictions on imports of antiquities from several countries.(278)

Because several countries considered major forces in the art trade failed to ratify the 1970 UNESCO Convention, UNESCO asked UNIDROIT (the International Institute for the Unification of Private Law, Rome) to prepare a new treaty that would provide protection to art trade in the rest of the world.(279) This treaty, completed on June 24, 1995, would greatly expand protection, but has a significant restriction: it only applies to art works stolen or looted after the date that the host country has ratified the treaty.(280) Thus far, out of the twenty-two countries who have signed the treaty, only three have ratified it, while two others have acceded to it.(281) The United States abstained from voting on the treaty and has not yet signed or ratified the UNIDROIT convention. This convention has generated significant controversy in the United States and the United Kingdom, as art dealers claim that they will no longer be able to exhibit or sell works in countries that have ratified the convention, on the grounds that the works might be confiscated by the country of origin, leaving art dealers without a cause of action.(282)

B. State Approaches

Various states have recognized the importance of promoting the arts by including provisions aimed at their protection and encouraging their development.(283) A number of states have enacted criminal simulation statutes, designed to customize existing forgery laws which, without such modification, are limited to actions associated with written documents and checks. For example, New York's Criminal Simulation Statute(284) extended New York's preexisting statute aimed at forgery of cultural property(285) to "antiques, objets d'art, rare books and comparable matter."(286)

Twenty-six other states and Guam have codified similar "criminal simulation" provisions into their penal codes,(287) reflecting a growing awareness of the special type of protection needed in the art community. In three states, however, these statutes do not apply to all art and antiquities, but are limited to certain excavated or historical objects.(288) Imposing stricter requirements, two states require disclosure of the number of copies in limited editions of fine art works, with penalties and injunctions for inadequate or erroneous disclosure.(289) In addition, states often use traditional statutes, such as conspiracy(290) or grand larceny, to prosecute art-related fraud.(291)

VIII. SENTENCING

Several provisions of the Federal Sentencing Guidelines are applicable to the theft of intellectual property.(292) This Section delineates the provisions applicable to each statute: the Economic Espionage Act, the National Stolen Property Act, the Trade Secrets Act, the Mail and Wire Fraud statutes, the RICO Act, the Trademark Counterfeiting Act and Copyright Felony Act, and False Marking and Counterfeiting or Forging Letters Patent. Because a defendant may be prosecuted under any combination of these statutes, the grouping analysis must be considered when determining the defendant's sentence after a multi-count conviction.(293)

A. Economic Espionage Act of 1996

Defendants convicted of violating 18 U.S.C. [sections] 1831 may be imprisoned for a maximum of fifteen years and/or fined $500,000.(294) Those convicted of violating [sections] 1832 may be imprisoned for up to ten years and/or fined $500,000.(295) Although the Act mandates forfeiture of any proceeds or property derived from violations, property used to commit or facilitate the commission of the crime may be forfeited only at the discretion of the Court.(296) Existing state law continues to provide alternative relief; the Act specifically states that it does not "preempt or displace any other remedies, whether civil or criminal."(297)

B. National Stolen Property Act

The National Stolen Property Act imposes imprisonment for not more than ten years and/or a fine determined under Title 18.(298)

Defendants convicted of violating the Act are sentenced under [sections] 2B 1.1.(299) The base offense level of four applies upon a total maximum loss to the victim of $100.(300) The offense level then rises as the financial loss to the victim increases, up to a maximum increase of twenty offense levels for losses exceeding $80,000,000.(301) Additionally, if the offense involved more than minimal planning, the offense level is in creased by two levels.(302) If the defendant is a person in the business of receiving and selling stolen property, the offense level is increased by four levels.(303)

C. Trade Secrets Act

Violations of the Trade Secrets Act may result in a maximum one-year imprisonment or a fine determined under Title 18; moreover, the convicted is removed from office or employment.(304)

Defendants are sentenced under [sections] 2H3.1.(305) The base offense level of nine is increased by three if the purpose of the conduct was to obtain commercial advantage or economic gain.(306) If the purpose of the conduct was to facilitate another offense, [sections] 2H3.1 requires the application of the guideline applicable to an attempt to commit the other offense when that offense level is greater than that determined for violation of the Trade Secrets Act.(307)

D. Mail and Wire Fraud Statutes

Mail and wire fraud risks a maximum five-year sentence and/or a fine determined under Title 18.(308) Fines can increase to $1,00,000 and the prison term can expand to thirty years, if the crime affects a financial institution.(309)

Defendants convicted of mail or wire fraud are sentenced under [sections] 2Fl.1, "Offenses Involving Fraud or Deceit."(310) The base offense level of six applies upon a total maximum loss to the victim of two thousand dollars.(311) The offense level then rises as the financial loss to the victim increases, up to a maximum increase of eighteen offense levels for losses exceeding eighty million dollars.(312) Additionally, the offense level can be elevated two levels if the crime involved more than one victim or if the crime involved more than minimal planning.(313)

E. Racketeer Influenced and Corrupt Organizations Act

Convictions under RICO carry a maximum sentence of twenty years and/or a fine determined under Title 18.(314) Additionally, RICO requires that the defendant forfeit any interests in enterprises established, operated, or maintained in violation of the statute.(315) Defendants convicted of RICO violations are sentenced under [sections] 2E1.1.316 The Anticounterfeiting Consumer Protection Act of 1996(317) broadens the scope of RICO to include intellectual property violations but does not change the penalties.

F. Trademark Counterfeiting Act and Copyright Felony Act

Individuals convicted of trafficking in forged or counterfeit goods TCA face a prison term of not more than ten years and/or a fine of up to $2,000,000.(318) Similarly, organizations convicted of trafficking in counterfeit goods risk a maximum fine of $5,000,000.(319) Upon a determination that any articles in the possession of a defendant bear counterfeit marks, the goods may be ordered destroyed.(320) The first-time offense of trafficking goods that bear forged or counterfeited labels may result in not more than five years imprisonment and/or a fine determined under Title 18.(321) Defendants convicted of trademark counterfeiting or criminal copyright infringement are sentenced under [sections] 2B5.3.(322) The base offense level is six.(323) If the retail value of the infringing items exceeds $2,000, the offense level increases by the corresponding number of levels indicated by the table in [sections] 2Fl.1, "Fraud and Deceit."(324)

The Copyright Felony Act defines a felony offense as the reproduction or distribution, during any 180-day period, of at least ten unauthorized copies, of one or more copyrighted works, with a collective value of more than $2,500.(325) First-time offenders may be imprisoned for not more than five years(326) and/or fined not more than $250,000 for an individual, or $500,000 for an organization.(327) In addition, if the offender derives personal financial gain from the offense, or causes third-party financial losses, the offender may be fined up to the greater of twice the gross gain or twice the gross loss.(328) Repeat offenders risk an increase in the maximum prison sentence increases to ten years.(329) The Copyright Felony Act prescribes a misdemeanor sentence for any criminal copyright infringement failing to meet the numerical thresholds described above: a maximum one-year imprisonment and a fine not to exceed $100,000.(330)

Finally, [sections] 506(b) grants courts discretion to order the forfeiture and destruction of infringing items and all implements, devices, or equipment used in their manufacture.(331)

Violations of [sections] 2319A can result in imprisonment for up to five years, and/or a fine determined under Title 18.332 Subsequent offenses carry maximum ten-year sentences and/or fines.(333) The convicted must also surrender rights to the illegal material.(334)

G. False Marking and Counterfeiting or Forging Letters Patent

False marking violations under [sections] 292 result in maximum fines of $500 per offense(335) where each false marking is subject to a separate fine.(336) One-half of the proceeds from a [sections] 292 conviction go to the citizen who brings the crime to the attention of the government; the other half of the proceeds go to the United States.(337) Violations of the Letters Patent statute(338) risk a maximum ten-year imprisonment and/or(339) fines pursuant to [sections] 3571 of Title 18.(340) Defendants convicted of counterfeiting or forging letters patent are sentenced under [sections] 2F1.1.(341)

(1.) Traditionally, theft of trade secrets has been handled by civil remedy. However, because of increased technological complexity, delays in civil litigation, and advances in computer technology, all of which permit thieves to profit more rapidly from trade secrets, traditional remedies, such as injunctions and civil damages, have become ineffective. Furthermore, because of the intangible nature of trade secrets, which once lost can never be physically recovered, the civil remedy is quite illusory.

(2.) See Jack Nelson, Spies Took $300-Billion Toll on U.S. Firms in '97 Business: FBI Says Espionage is Increasing, with at Least 23 Governments Targeting American Companies, L.A. TIMES, Jan. 12, 1998, at A1 (noting that numerous foreign governments are "targeting" intellectual property of American firms, especially trade secrets); Sharon Walsh & Robert O'Harrow, Jr., Trying to Keep a Lock on Company Secrets; Law Enforcement Officials Fear Rise in Computer Crimes, Made Easier by Technological Advances, WASH. POST, Feb. 17, 1998, at DI (describing computer espionage aimed at company secrets). See generally AMERICAN SOCIETY FOR INDUSTRIAL SECURITY 1997/98 TRENDS IN INTELLECTUAL PROPERTY LOSS SPECLAL REPORT (1998).

(3.) Economic Espionage Act of 1996, Pub. L. No. 104-294, 110 Stat. 3488 (codified at 18 U.S.C. [subsections] 1831-1839) [hereinafter "EEA"]; see Gerald J. Mossinghoff et al., The Economic Espionage Act: A New Federal Regime of Trade Secret Protection, 79 J. PAT. & TRADEMARK OFF. SOC'Y 191, 191-95 (1997) (discussing reasons for enactment of the EEA).

(4.) 18 U.S.C.A. [sections] 1831 (West Supp. 1998).

(5.) 18 U.S.C.A. [sections] 1832 (West Supp. 1998). The EEA provides for a maximum term of imprisonment of 15 years if the criminal act was done with the intent to benefit a foreign government and 10 years in all other cases. The maximum fine that may be imposed upon an organization is $10 million if the intent of the organization was to benefit a foreign government. In all other cases, the maximum fine imposed on an organization is $5 million. 18 U.S.C.A. [subsections] 1831-1832.

(6.) 18 U.S.C.A. [sections] 1839 (West Supp. 1998). Even if the original owner never loses custody over his property, the EEA recognizes the loss of value to that owner. See generally COMPUTER CRIME & INTELLECTUAL PROPERTY SECTION, CRIMINAL DIVISION, U.S. DEP'T OF JUSTICE, FEDERAL PROSECUTION OF VIOLATIONS OF INTELLECTUAL PROPERTY RIGHTS (COPYRIGHTS, TRADEMARKS AND TRADE SECRETS) 73 (1997) [hereinafter "FEDERAL PROSECUTION MANUAL"].

(7.) UNIV. TRADE SECP, ETS ACT, 14 U.L.A. 438 (1996).

(8.) Mossinghoff, New Regime, supra note 3, at 197. The EEA trade secret definition is broader in that it expands the number of trade secrets listed, expressly protects intangible information, and protects information in any form regardless of how it is stored. See Arthur J. Schwab & David J. Porter, Federal Prosecution of Trade Secrets: Understanding the Economic Espionage Act of 1996, 10 No. 4 J. PROPRIETARY RTS. 2, 3-4 (1998). 9. 18 U.S.C.A. [sections] 1839(3)(A) (West Supp. 1998)

(10.) See 18 U.S.C.A. [sections] 1839(3)(B) (West Supp. 1998).

(11.) See FEDERAL PROSECUTION MANUAL, supra note 6, at 75.

(12.) 18 U.S.C.A. [sections] 1839(3).

(13.) James H.A. Pooley, et al., Understanding the Economic Espionage Act of 1996, 5 TEX. INTELL. PROP. L.J. 177, 189 (1997).

(14.) H.R. REP. No. 104-788, at 7 (1996), reprinted in 1996 U.S.C.C.A.N. 4021, 4033 [hereinafter "EEA HOUSE REPORT"].

(15.) 18 U.S.C.A. [sections] 1831(a) (West Supp. 1998).

(16.) Section 1832 states in relevant part: Whoever, with intent to convert a trade secret, that is related to or included in a product that is produced for or placed in interstate or foreign commerce, to the economic benefit of anyone other than the owner thereof, and intending or knowing that the offense will, injure any owner of that trade secret, knowingly--
 (1) steals, or without authorization appropriates, takes, carries away, or
 conceals, or by fraud, artifice, or deception obtains such information;

 (2) without authorization copies, duplicates, sketches, draws, photographs,
 downloads, uploads, alters, destroys, photocopies, replicates, transmits,
 delivers, sends, mails, communicates, or conveys such information;

 (3) receives, buys, or possesses such information, knowing the same to have
 been stolen or appropriated, obtained, or converted without authorization;

 (4) attempts to commit any offense described in paragraphs (1) through (3);
or

 (5) conspires with one or more other persons to commit any offense
 described in paragraphs (1) through (3), and one or more of such persons do
 any act to effect the object of the conspiracy ...


18 U.S.C.A. [sections] 1832(a) (West Supp. 1998). The five clauses of [subsections] 1831(a) and 1832(a) are the same and are presumably disjunctive so that violation of any one clause is sufficient to violate the statute. 18 U.S.C.A. [subsections] 1831(a) & 1832(a). Section 1832 contains three limitations not found in [sections] 1831: (1) defendant must intend to convert a trade secret to the economic benefit of someone other than the owner; (2) defendant must intend or know the threat will injure the owner of the trade secret; and (3) the trade secret must be "related to or included in a product that is produced for or placed in interstate or foreign commerce." United States v. Hsu, 155 F.3d 189, 196 (3d Cir. 1998).

(17.) 18 U.S.C.A. [sections] 1832(a).

(18.) 14 U.L.A. 438 (1996).

(19.) Pooley, supra note 13, at 192.

(20.) See 18 U.S.C.A. [sections] 1832(a)(3) (applying the act to anyone who knowingly "receives, buys, or possesses such information, knowing the same to have been stolen or appropriated, obtained, or converted without authorization"); see also Pooley, supra note 13, at 192 (stating that EEA provisions are in some respects significantly broader than other civil trade secret laws).

(21.) 18 U.S.C.A. [sections] 1837(2) (West Supp. 1998).

(22.) 18 U.S.C.A. [sections] 1837(1) (West Supp. 1998).

(23.) 18 U.S.C.A. [sections] 1837(2) (West Supp. 1998).

(24.) Section 1833 states:

This chapter does not prohibit--
 (1) any otherwise lawful activity conducted by a governmental entity of the
 United States, a State, or a political subdivision of a State; or

 (2) the reporting of a suspected violation of law to any governmental
 entity of the United States, a State, or a political subdivision of a
 State, if has lawful authority with respect to that violation.


18 U.S.C.A. [sections] 1833 (West Supp. 1998).

(25.) EEA HOUSE REPORT, supra note 14, at 14.

(26.) Id.

(27.) See Gerald J. Mossinghoff et al., The Economic Espionage Act: A Prosecution Update, 80 J. PAW. [&TRADEMARK] OFF. SOC'Y 360, 366 (1998).

(28.) Victoria Slind-Flor, New Spy Act to Boost White-Collar Defense Biz: Enhanced Enforcement of Trade Secret Theft Expected, NAT'L L.J., July 28, 1997, at A1; see also Mossinghoff, Prosecution Update, supra note 27, at 367 (opining government desire to "work out the `bugs' in the new law" with lesser offenders before pursuing more serious cases).

(29.) Mossinghoff, Prosecution Update, supra note 27, at 366-67. Although some current cases involve foreign companies and nationals, there have been no cases under section 1831 involving the theft of trade secrets to benefit foreign governments, instrumentalities, or agents.

(30.) United States v. Hsu, No. 97-523-M (filed E.D. Pa. 1997); United States v. Ho, No. 97-522-M (filed E.D. Pa. 1997); FBI Charges Taiwanese Tried to Steal Taxol Trade Secrets from BMS, Pharmaceutical Litig. Rep., July 1997, at 12,413.

(31.) FBI Charges, supra note 30, at 12,413.

(32.) United States v. Hsu, 155 F.3d 189 (3d Cir. 1998).

(33.) Id. at 203.

(34.) Slind-Flor, supra note 28, at Al.

(35.) Id.

(36.) See Mossinghoff, Prosecution Update, supra note 27, at 365-66 (discussing employee's attempts to sell trade secrets to competitors).

(37.) See id. at 366 (discussing defendant's knowing conversion of proprietary software program by selling it for her personal benefit). This appears to be the first case that cites no other criminal statutes other than the EEA in the indictment. Id.

(38.) See id. (discussing arrest of circulation managers after allegedly offering to sell marketing plans and subscription lists to rival newspaper).

(39.) See id. at 365 (discussing arrests resulting from FBI sting operation); see also Daniel Eisenberg, Eyeing the Competition, TIME, Mar. 22, 1999 at 58 (discussing a December 1998 conviction under the EEA).

(40.) 18 U.S.C. [sections] 2314 (1994). The NSPA was intended "to fight the `roving criminal' whose access to automobiles made it easy to move stolen property across state lines,.... frustrating local law enforcement." Keith D. Krakaur & Robert C. Juman, Two New Federal Offenses Help Battle Corporate Espionage, 4 No. 2 Bus. CRIMES BULL.: COMPLIANCE & LITIG. 7, 7 (1997).

(41.) 18 U.S.C. [sections] 2314. Section 2314 provides criminal sanctions to any person:
 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, transports or causes to be transported, or
 induces any person or persons to travel in, or to be transported in
 interstate or foreign commerce in the execution or concealment of a scheme
 or artifice to defraud that person or those persons of money or property
 having a value of $5,000 or more....


18 U.S.C. [sections] 2314.

(42.) Spencer Simon, The Economic Espionage Act of 1996, 13 BERKELEY TECH. L.J. 305,306 (1998).

(43.) See United States v. Stegora, 849 F.2d 291, 292 (8th Cir. 1988) (ruling theft of sample of synthetic casting material used in repairing broken bones falls under NSPA even though a major portion of its value comes from an intangible component); United States v. Bottone, 365 F.2d 389, 393-94 (2d Cir. 1966) (holding NSPA applicable to theft of documents containing trade secrets); United States v. Seagraves, 265 F.2d 876, 880 (3d Cir. 1959) (finding theft of geophysical maps identifying possible oil deposits to fall under NSPA).

(44.) Van Dorn Co. v. Howington, 623 F. Supp. 1548, 1558 (N.D. Ohio 1985).

(45.) Peter J.G. Toren, The Prosecution of Trade Secret Thefts Under Federal Law, 22 PEPP. L. REV. 59, 67-68 (1994).

(46.) See United States v. Brown, 925 F.2d 1301, 1305 (10th Cir. 1991) (dismissing prosecution for lack of proof that computer program was physically removed from plaintiff's place of business); Abbott v. United States, 239 F.2d 310, 312 (5th Cir. 1956) (requiring government to prove "[w]ho carried it, or how, or who caused it to be transported"); see also Bottone, 365 F.2d at 393 (finding NSPA covers photocopies transported in interstate commerce stolen from company and not made on company's equipment); Howington, 623 F. Supp. at 1558 (holding plaintiff failed to allege transportation by "merely stat[ing] that a trade secret was appropriated in violation of the statutes").

(47.) 265 F.2d 876 (3d Cir. 1959). In Seagraves, the stolen trade secrets were geophysical and geological maps produced by Gulf Oil and copied with its equipment onto its paper. The court distinguished the instant case from others by noting that the trade secrets stolen were "the permanent form into which was cast the advice and assistance for which the defendants were consulted." Id. at 880. Evidence showed that maps of this type were frequently sold. In addition, expert testimony established the value of some of the individual maps at well over $5,000. Id.

(48.) Seagraves, 265 F.2d at 880 (citing BLACK'S LAW DICTIONARY 823 (4th ed. 1951)); see also Brown, 925 F.2d at 1308-09 (placing a restriction that goods, wares or merchandise must be transported in physical form to qualify as stolen trade secrets under NSPA); United States v. Greenwald, 479 F.2d 320, 321 (6th Cir. 1973) (finding documents containing chemical formulation to be goods, wares, or merchandise, because they were treated as assets in chemical manufacturers' market).

(49.) Id.; see also Greenwald, 479 F.2d at 322 (arguing established market among chemical competitors for chemical formulations sufficient to make stolen chemical formula "good" within meaning of NSPA). But see Brown, 925 F.2d at 1308-09 (finding that computer programs are intangible intellectual property, not "goods, wares or merchandise" within meaning of NSPA). For further discussion of this topic, see the COMPUTER CRIMES article in this issue.

(50.) See United States v. Lyons, 992 F.2d 1029, 1033 (10th Cir. 1993) (holding computer software stolen in conjunction with computer hardware was theft of tangible property).

(51.) See, e.g., R.E. Davis Chem. Corp. v. Nalco Chem. Co., 757 F. Supp. 1499, 1512 (N.D. ill. 1990) (deciding that documents obtained and studied within boundaries of Texas have not crossed state lines).

(52.) See United States v. Schaffer, 266 F.2d 435, 439 (2d Cir. 1959), aff'd, 362 U.S. 511 (1960) (stating purpose of $5000 minimum value is to decrease case load at Department of Justice).

(53.) See United States v. Seagraves, 265 F.2d 876, 880 (3d Cir. 1959) (looking to amount paid for stolen maps to determine their market value); see also United States v. Greenwald, 479 F.2d 320, 321 (6th Cir. 1973) (attributing defendant's profits from sale of stolen chemical formulas to established market of finished products among competitors in industry). But see In re Vericker, 446 F.2d 244, 248 (2d Cir. 1971) (refusing to find market for papers showing individuals who are or may have engaged in criminal activity or what procedures are used by FBI in tracking them down); United States v. Willette, 764 F. Supp. 759, 761-62 (N.D.N.Y. 1991) (refusing to determine value based on retail price when owner was part of wholesale market).

(54.) See United States v. Wilson, 900 F.2d 1350, 1355-56 (9th Cir. 1990) (rejecting strict market value where goods have "no readily ascertainable market value"); United States v. Stegora, 849 F.2d 291, 292 (8th Cir. 1988)

(looking to amount that owner invested in developing trade secret). But see Abbott v. United States, 239 F.2d 310, 312-13 (5th Cir. 1956) (rejecting alternate valuation scheme and relying on 18 U.S.C. [sections] 2311 to require establishment of genuine market value--where willing buyers bargain with willing sellers--to meet minimum value requirement).

(55.) See Wilson, 900 F.2d at 1355-56 (looking to development costs and price for which defendant sold stolen goods to determine valuation absent actual market).

(56.) See United States v. Jackson, 576 F.2d 749, 757 (8th Cir. 1978) (using "thieves' market value" since value of contraband was speculative or not fixed and thieves' market was only guidepost available for establishing value).

(57.) 18 U.S.C. [sections] 2314.

(58.) See 18 U.S.C. [sections] 2314. ("[w]hoever transports ... goods, wares, merchandise ... knowing the same to have been stolen") (emphasis added).

(59.) See United States v. Bottone, 365 F.2d 389, 392-93 (2d Cir. 1966) (holding proof of defendant's comings and goings clearly sufficient to suggest he knew he was selling stolen goods).

(60.) 18 U.S.C. [sections] 2314 (1994). But see United States v. Riggs, 739 F. Supp. 414, 421 (N.D. Ill. 1990) (applying NSPA's "goods, wares, or merchandise" definition to intangible, technical information).

(61.) 925 F.2d 1301 (10th Cir. 1991).

(62.) Id. at 1302.

(63.) Id. at 1305.

(64.) Id. at 1307 n.14. The court explained:
 [S]ection 2314 applies only to physical "goods, wares or merchandise."
 Purely intellectual property is not within this category. It can be
 represented physically, such as through writing on a page, but the
 underlying, intellectual property itself, remains intangible. It is true
 that the intellectual property involved in the instant case was more nearly
 "stolen, converted or taken by fraud" in the sense that it was at no time
 freely presented to the public.... We hold that the computer program itself
 is an intangible intellectual property, and as such, it alone cannot [sic]
 constitute goods, [or] wares ... which have been stolen, converted or taken
 within the meaning of [subsections] 2314 or 2315.


Id. at 1307-08 (citations omitted).

(65.) Id. at 1307; cf. United States v. Lyons, 992 F.2d 1029, 1033 (10th Cir. 1993) (distinguishing Brown by allowing sentencing under NSPA because defendant stole both software and hardware).

(66.) 18 U.S.C. [sections] 1905 (1994). There is only one reported decision under this statute. See United States v. Wallington, 889 F.2d 573 (5th Cir. 1989). Since the statute only provides for misdemeanor sanctions, it has not often been used to prosecute unauthorized disclosures. See Pooley, supra note 13, at 179.

(67.) See Pooley, supra note 13, at 179-80.

(68.) 18 U.S.C.A. [subsections] 1341, 1343 (1994).

(69.) The mail fraud statute is flexible since almost any use of the mall brings one under the statute's prohibitions. See Schmuck v. United States, 489 U.S. 705, 710-11 (1989) (holding that use, of mail need not be essential part of scheme but only a "step in [the] plot").

(70.) For a more extensive discussion of the mail and wire fraud statutes, see the MAIL AND WIRE FRAUD article in this issue.

(71.) 18 U.S.C. [sections] 1346 (1994).

(72.) See United States v. Henry, 29 F.3d 112, 114 (3d Cir. 1994) (stating "[t]he statutes cover schemes to defraud another of intangible property, such as confidential business information").

(73.) See Sunbird Air Serv., Inc. v. Beech Aircraft Corp., Civ. A. No. 89-2181-V, 1992 WL 135021, *4 (D. Kan. May 29, 1992) (rejecting motion to dismiss on grounds plaintiff failed to show victims were actually defrauded).

(74.) See Ginsburg v. United States, 909 F.2d 982, 991 (7th Cir. 1990) (finding "actual success of a scheme to defraud is not required for a mail fraud conviction").

(75.) See United States v. Dixon, 536 F.2d 1388, 1399 n. 11 (2d Cir. 1976) (requiting prosecution prove "some actual harm or injury was contemplated"); see also United States v. Von Barta, 635 F.2d 999, 1006 (2d Cir. 1980) (stating defendant must have intended to defraud), overruled on other grounds by Ingber v. Enzor, 841 F.2d 450 (2d Cir. 1988); United States v. Regent Office Supply Co., 421 F.2d 1174, 1181 (2d Cir. 1970) (stating that there must be showing of intended harm; misrepresentations amounting to deceit are not sufficient to constitute fraudulent intent).

(76.) FEDERAL PROSECUTION MANUAL, supra note 6, at 91-92; see also Abbott v. United States, 239 F.2d 310, 315 (5th Cir. 1956).

(77.) FEDERAL PROSECUTION MANUAL, supra note 6, at 92.

(78.) 18 U.S.C. [subsections] 1341, 1343 (1994); see also Pooley, supra note 13, at 186.

(79.) 18 U.S.C. [subsections] 1961-1968 (1994). For a full discussion of [subsections] 1961-1968, see the RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS article in this issue.

(80.) See Religious Tech. Ctr. v. Wollersheim, 796 F.2d 1076, 1084 (9th Cir. 1986) (recognizing civil RICO claims for trade secret theft; finding that injunctive relief not available in this RICO action).

(81.) 18 U.S.C. [sections] 1341 (1994).

(82.) 18 U.S.C. [sections] 1343 (1994).

(83.) 18 U.S.C. [sections] 2314 (1994).

(84.) 18 U.S.C. [sections] 2315 (1994).

(85.) There must be at least two predicate acts of racketeering activity to establish a pattern of racketeering activity. 18 U.S.C. [sections] 1961(5) (1994).

(86.) S.I. Handling Sys., Inc. v. Heisley, 658 F. Supp. 362, 377 (E.D. Pa. 1986).

(87.) Id.

(88.) Id. at 375.

(89.) Fleet Mgmt. Sys., Inc. v. Archer-Daniels-Midland Co., 627 F. Supp. 550, 559 (C.D. Ill. 1986). The suit alleged that the defendant had misappropriated computer software, obtained by license from the plaintiff and then fraudulently misrepresented to plaintiff that it purged the software from its computer system in numerous mail and wire communications over the next two years. Id. at 552-53; see also H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 239 (1989) (stating at least two separate predicate acts of racketeering activity having continuity and relationship and posing threat of continued criminal activity are required to prove pattern of racketeering activity).

(90.) See ALA. CODE [sections] 13A-8-1 (1994) (theft and related offenses); ALASKA, A STAT. [subsections] 11.46.100 to 11.46.150, 11.46.990 (Michie 1996) (theft and related offenses); ARIZ. REV. STAT. ANN. [subsections] 13-1801 to 13-1804 (West 1994) (theft); ARK. CODE ANN. [sections] 5-36-107 (Michie 1987 & Supp. 1993) (theft of trade secret); CAL. PENAL CODE [sections] 499C (Deering 1983 & Supp. 1996) (trade secrets, theft or unauthorized copying); COLO. REV. STAT. [sections] 7-74-101 (1997) (uniform trade secrets act); CONN. GEN. STAT. ANN. [sections] 53a-124 (West 1993) (larceny in the third degree, class D felony); DEL. CODE ANN. tit. 11, [subsections] 841,857(4) (1995) (theft and related offenses); D.C. CODE ANN. [subsections] 48-501 to 48-510 (1997) (trade secrets); FLA. STAT. ANN. [sections] 812.081 (West 1994) (trade secrets, theft); GA. CODE ANN. [sections] 16-8-13 (1996) (theft of trade secrets); HAW. REV. STAT. [sections] 708-800 (1993 & Supp. 1997) (offenses against property rights); IDAHO CODE [subsections] 48-801 to 48-807 (1947) (Idaho trade secrets act); 720 ILL. COMP. STAT. 5/16-1 (1997) (theft and related offenses); IND. CODE [subsections] 24-2-3-1 to 24-2-3-8 (1998) (trade secrets); IOWA CODE [subsections] 550.1 to 550.8 (1997) (trade secrets); KAN. STAT. ANN. [subsections] 60-3320 to 60-3325 (1994) (trade secrets); Ky. REV. STAT. ANN. [subsections] 365.880 to 365.900 (Michie 1996) (uniform trade secrets act); LA. REV. STAT. ANN. [subsections] 51.1431 to 51.1439 (West 1987 & Supp. 1998) (uniform trade secrets act); ME. REV. STAT. ANN. tit. 17A [subsections] 351 to 353, 362 (West 1983 & Supp. 1998) (theft-consolidation); MD. CODE ANN., Commercial Law [subsections] 11-1201 to 11-1209 (1990 & Supp. 1997) (Maryland uniform trade secrets act); MASS. GEN. LAWS ch. 93, [sections] 42 (1994), ch. 266 [sections] 60A (1992) (crimes against property--stolen trade secrets); MICH. COMP. LAWS ANN. [subsections] 752.771 to 7:52.773 (West 1991) (penal code--trade secrets); MINN. STAT. [sections] 609.52 (1991 & Supp. 1998) (theft and related crime); Miss. CODE ANN. [subsections] 75-26-1 to 75-26-19 (1991 & Supp. 1997) (uniform trade secrets act); Mo. ANN. STAT. [sections] 570.010 (West 1994) (stealing and related offenses); MONT. CODE ANN. [subsections] 45-2-101, 45-6-302 (1992) (theft and related offenses); NEB. REV. STAT. [subsections] 87-501 to 87-507 (1995) (trade secrets act); NEY. REV. STAT. [subsections] 600A.010 to 600A. 100 (1997) (trade secrets (uniform act)); N.H. REV. STAT. ANN. [subsections] 637:1 to 637:11 (1996) (criminal code: theft); N.J. STAT. ANN. [sections] 2C:20-1 (West 1995) (theft and related offenses); N.M. STAT. ANN. [sections] 57-3A- (Michie 1996) (larceny); N.Y. PENAL LAW [sections] 155.00 (McKinney 1984 & Supp. 1998) (offenses involving theft: larceny); N.C. GEN. STAT. [sections] 14-75.1 (1993) (offenses against property: larceny); N.D. CENT. CODE [subsections] 47-25.1- 01 to 47-25.1-08 (Supp. 1993) (trade secrets); Omo REV. CODE ANN. [sections] 2913.01 (Anderson 1996) (theft and fraud); OKLA. STAT. ANN. tit. 21, [sections] 1732 (West 1983 & Supp. 1998) (larceny of trade secrets); OR. REV. STAT. [sections] 164.015 (1995) (offenses against property); 18 PA. CONS. STAT. [sections] 3930 (1995 & Supp. 1997) (theft of trade secrets); R.I. GEN. LAWS [sections] 11-41-1 (1994 & Supp. 1996) (stealing as larceny); S.C. CODE ANN. [sections] 16-13-30 (Law Co-op. Supp. 1996) (petit larceny, grand larceny); S.D. CODIFIED LAWS ANN. [subsections] 22-1-2, 22-30A-1 to 22-30A-3 (Michie 1998) (theft); TENN. CODE ANN. [sections] 39-14-138 (1997) (theft of trade secrets); TEX. PENAL CODE ANN. [sections] 31.05 (West 1994 & Supp. 1998) (theft of trade secrets); UTAH CODE ANN. [subsections] 76-6-401, 76-6-404 (1953 & Supp. 1998) (theft); VT. STAT. ANN. tit. 13, [subsections] 2501 to 2502 (Supp. 1996) (grand larceny); V.I. CODE ANN. tit. 14, [sections] 1665 (1974) (disclosure of trade secret by government employee); VA. CODE ANN. [sections] 18.2-95 (Michie Supp. 1996) (grand larceny defined; how punished); WASH. REV. CODE [sections] 19.108.010 (1996) (theft and robbery); W. VA. CODE [sections] 61-3-13 (1997) (grand and petit larceny); Wis. STAT. ANN. [sections] 943.205 (West 1996) (theft of trade secrets); WYO. STAT. [subsections] 6-3-401 to 6-3-403, 6-3-502 (1997) (larceny and related offenses); see also Linda B. Samuels & Bryan K. Johnson, The Uniform Trade Secrets Act: The States' Response, 24 CREIGHTON L. REV. 49 (1990).

(91.) For examples of state codes specifically addressing trade secrets, see COLO. REV. STAT. [sections] 7-74-101 (1997) (uniform trade secrets act), FLA. STAT. ANN. [sections] 812.081 (West 1994), and Omar. STAT. ANN. tit. 21, [sections] 1732 (West 1983 & Supp. 1998).

(92.) For examples of state codes using the general theft statutes to cover theft of trade secrets, see N.H. REV. STAT. ANN. [subsections] 637:1 to 637:3 (1996) and UTAH CODE ANN. [subsections] 76-6-401, 76-4-404 (1953 & Supp. 1998).

(93.) For examples of state code requiting tangible items to cover theft of trade secrets, see GA. CODE ANN. [sections] 16-8-13 (1996), MICH. COMP. LAWS ANN. [subsections] 752.771 to 752.773 (West 1991), and TENN. CODE ANN. [sections] 39-3-1126 (1997).

(94.) See H.R. REP. No. 104-556, at 2 (1996), reprinted in 1996 U.S.C.C.A.N. 1074, 1075 [hereinafter "ANTICOUNTERFEITING HOUSE REPORT"].

(95.) 18 U.S.C. [sections] 2320(d)(1)(A) (1994).

(96.) See United States v. Sultan, 115 F.3d 321, 325 (5th Cir. 1997) (presenting requirements for prosecuting criminal trademark counterfeiting offense); United States v. Torkington, 812 F.2d 1347, 1349 (11th Cir. 1987) (explaining the requirement that counterfeit mark must be likely to cause confusion among prospective purchasers).

(97.) 18 U.S.C. [sections] 2320 (1994).

(98.) See United States v. Baker, 807 F.2d 427, 429 (5th Cir. 1986) (relying on legislative history to show that criminal intent is not required).

(99.) FEDERAL PROSECUTION MANUAL, supra note 6, at 56.

(100.) 15 U.S.C. [sections] 1051 (1994).

(101.) FEDERAL PROSECUTION MANUAL, supra note 6, at 59.

(102.) 18 U.S.C. [sections] 2320(a) (1994).

(103.) 18 U.S.C. [sections] 2320(a) (1994). Repeat offenders, whether individuals or organizations, will receive harsher penalties. Id.

(104.) United States Dep't of Justice, FBI Releases First Results of Nationwide Crack Down on Criminal Trademark and Copyright Fraud, 1997 WL 230122.

(105.) Id.

(106.) Id.

(107.) See 18 U.S.C. [sections] 1956(c)(7)(D) (1994).

(108.) Pub. L. 104-153, [sections] 3, 110 Stat. 1386 (1996) (amending 18 U.S.C. [sections] 1961(1)(B)).

(109.) ANTICOUNTERFEITING HOUSE REPORT, supra note 94, at 3-4 (1996).

(110.) FEDERAL PROSECUTION MANUAL, supra note 6, at 61.

(111.) ANTICOUNTERFEITING HOUSE REPORT, supra note 94, at 6.

(112.) 18 U.S.C. [sections] 1963(a) (1994).

(113.) 18 U.S.C. [sections] 1956(a)(1) (1994).

(114.) ANTICOUNTERFEITING HOUSE REPORT, supra note 94, at 7.

(115.) U.S. CONST. art. I, [sections] 8, cl. 8. Congress shall have the power "[t]o 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.... "Id.

(116.) See, e.g., United States v. LaMacchia, 871 F. Supp. 535, 539 (D. Mass. 1994) (requiring commercial exploitation for the criminal offense of software piracy). See generally Mary Jane Saunders, Criminal Copyright Infringement and the Copyright Felony Act, 71 DENy. U. L. REV. 671, 672 (1994) (discussing requirements for criminal copyright infringement); Robert A. Spanner, The Brave New World of Criminal Software Infringement Prosecutions, COMPUTER LAW, Nov. 1995, at 1 (discussing various factors involved in criminal software prosecutions); Kent Walker, Federal Criminal Remedies for the Theft of Intellectual Property, 16 HASTINGS COMM. & ENT. L.J. 681 (1994) (presenting U.S. Attorney's view on factors for prosecuting high-technology crime as distinguished from civil infringement).

(117.) See LaMacchia, 871 F. Supp. at 539-40 (discussing history of criminal copyright law); FEDERAL PROSECUTION MANUAL, supra note 6, at 17-39 (describing the criminal copyright statute); Saunders, supra note 116, at 679-80 (same).

(118.) Copyright Act of 1976, Pub. L. No. 94-553, 90 Stat. 2541 (codified as amended at 17 U.S.C. [sections] 506(a) (1994)).

(119.) Act of May 24, 1982, Pub. L. No. 97-180, 96 Stat. 9 (codified at 18 U.S.C. [sections] 2319 (1994)). While certain acts of criminal copyright infringement were defined as felonies, most infringements remained misdemeanor offenses. 18 U.S.C. [sections] 2319 (1994).

(120.) Pub. L. No. 102-561, 106 Stat. 4233 (codified as amended at 18 U.S.C. [sections] 2319(b)-(c) (1994)). For an in-depth discussion of the legislative history of the Copyright Felony Act, see Saunders, supra note 116, at 679-80.

(121.) For a discussion of what constitutes copyright infringement of computer software, compare MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511, 518-19 (9th Cir. 1993) (asserting that "copying" occurs even when a copyrighted program is temporarily loaded into a computer's RAM (random access memory)), with Stenograph, LLC v. Bossard Assoc. Inc., 144 F.3d 96 (D.C. Cir. 1998) (exploring alternative installation standard for copying). See also Religious Tech. Ctr. v. Netcom On-Line Communication Servs., Inc., 907 F. Supp. 1361, 1368-73 (N.D. Cal. 1995) (holding Internet provider not liable for copyrighted material loaded onto computer by third party when provider lacked knowledge that material was copyrighted).

(122.) For a comparison of the old and revised statute, see Carl H. Loewenson, Jr. & Martha E. Nelson, Congress Toughens Criminal Copyright Law, N.Y.L.J., Nov. 13, 1992, at 1.

(123.) 18 U.S.C. [sections] 2319 (1994). Under the 1992 Act, felony sanctions applied to ten or more copies made within a 180 day period, with a retail value more than $2,500. 18 U.S.C. [sections] 2319 (1994).

(124.) 17 U.S.C. [sections] 506(a) (1994).

(125.) No Electronic Theft (NET) Act of 1997, Pub. L. No. 105-147, 111 Stat. 2678 (1997) (amending 17 U.S.C. [subsections] 506, 507, 18 U.S.C. [subsections] 2319, 2319A, 2320).

(126.) NET Act of 1997, [sections] 2(b) (amending 17 U.S.C. 8 506(a)).

(127.) See H.R. REP. No. 105-339, at 3-5 (1997) (describing legislative justifications for removal of "financial gain" requirement for criminal copyright infringement). But see Wendy M. Grossman, Cyber View: Downloading As a Crime, Sci. AM., Mar. 1998, at 37 (criticizing NET Act for absence of fair-use exemptions).

(128.) The section also provides for forfeiture, seizure and destruction of such unauthorized recordings, and encompasses the distribution in the United States of copies of unauthorized recordings made outside the United States. 18 U.S.C. [sections] 2319A(b)-(c) (1994).

(129.) 17 U.S.C. [sections] 506(c)-(d) amended by Pub. L. No. 105-147, [sections] 2(b), 111 Stat. 2678 (1997).

(130.) 18 U.S.C. [sections] 2319A(a) (1994). Section 2319A(a) states in relevant part:
 Whoever, without the consent of the performer or performers involved,
 knowingly and for purposes of commercial advantage or private financial
 gain--

 (1) fixes the sounds or sounds and images of a live musical performance in
 a copy or phono-record, or reproduces copies or phonorecords of such a
 performance from an unauthorized fixation; (2) transmits or otherwise
 communicates to the public the sounds or sounds and images of a live
 musical performance; or (3) distributes or offers to distribute, sells or
 offers to sell, rents or offers to rent, or traffics in any copy or
 phonorecord fixed as described in paragraph (1), regardless of whether the
 fixations occurred in the United States ...


Id.; see also FEDERAL PROSECUTION MANUAL, supra note 6, at 40.

(131.) See United States v. Larracuente, 952 F.2d 672, 673 (2d Cir. 1992) (holding that infringement can be proven by evidence of a valid copyright plus copying).

(132.) See United States v. Cohen, 946 F.2d 430 (6th Cir. 1991) (upholding a conviction of criminal copyright infringement supported by circumstantial evidence); Saunders, supra note 116, at 682-85 (discussing methods of proving first element of offense).

(133.) See Smith v. Jackson, 84 F.3d 1213, 1218 (9th Cir. 1996) (discussing extrinsic and intrinsic prongs of substantial similarity test).

(134.) For a comparison of the virtual identity and substantial similarity tests for infringement, see Apple Computer, Inc. v. Microsoft Corp., 35 F.3d 1435 (9th Cir. 1994). Virtual identity may be a more useful standard for determining infringement in the case of "reverse engineering," whereby programmers dissect legally obtained software and then instruct a third set of programmers on functional requirements of the software, thus creating "virtually identical" software programs which are not exact copies of one another.

(135.) 823 F.2d 316 (9th Cir. 1987)

(136.) Id. at 319.

(137.) See Hartman v. Hallmark Cards, Inc., 833 F.2d 117, 120 (8th Cir. 1987) (applying two-prong test to copyrighted graphics); Cooling Sys. & Flexibles, Inc. v. Stuart Radiator, Inc., 777 F.2d 485,493 (9th Cir. 1985) (explaining that extrinsic test can be decided as matter of law, while intrinsic test is a question of fact). See generally Saunders, supra note 116, at 499 (discussing approaches by various courts to showing of extrinsic and intrinsic similarities of original work and alleged copy).

(138.) McCulloch, 823 F.2d at 319.

(139.) See Apple Computer, 35 F. 3d at 1441-47 (describing court's proper dissection of the Microsoft graphical user interface (GUI) into protectable and unprotectable components for purposes of evaluating substantial similarity); Lotus Dev. Corp. v. Paperback Software Int'l, 740 F. Supp. 37, 67 (D. Mass. 1990) (stating that only those components that are copyrightable should be analyzed). But see Atari Games Corp. v. Oman, 888 F.2d 878, 882 (D.C. Cir. 1989) (declaring that sequence of frames in computer game must be analyzed as a whole and not on a component-by-component basis).

(140.) See United States v. Moore, 604 F.2d 1228, 1235 (9th Cir. 1979) (holding that government may establish criminal infringement by proving that defendants distributed copyrighted sound recordings; it is not necessary to prove defendants both reproduced and distributed infringing recordings).

(141.) See United States v. Morison, 844 F. 2d 1057, 1071 (4th Cir. 1988) (establishing willful to mean that defendant knowingly did an illegal act); United States v. Cross, 816 F.2d 297, 303 (7th Cir. 1987) (asserting that defendant must act with the knowledge that his activity is illegal); United States v. Heilman, 614 F.2d 1133, 1137 (7th Cir. 1980) (finding willful infringement of copyright when defendant knew material was copyrighted); Saunders, supra note 116, at 688 (comparing majority and minority rules); cf. United States v. Manzer, 69 F.3d 222, 226 (8th Cir. 1995) (declaring that government need only prove intent to defraud, and not intent to break the law, but must go beyond proof of merely intent to copy).

(142.) See United States v. Hernandez, 952 F.2d 1110 (9th Cir. 1991) (holding that defendant had requisite intent to join conspiracy to infringe because he had control over tapes, had shown others how to duplicate tapes, and had transported tapes from production site to storage unit); United States v. Backer, 134 F.2d 533 (2d Cir. 1943) (holding that defendant unlawfully gave orders to make copies closely resembling copyrighted work without causing "copyright trouble"); Saunders, supra note 116, at 688 (comparing majority and minority rules).

(143.) See Cross, 816 F.2d at 301 (holding that fact that copies were not sold for money was irrelevant where hope of gain existed) (citing Moore, 604 F.2d at 1235); see also United States v. Moran, 757 F. Supp. 1046, 1051 (D. Neb. 1991) (holding that defendant did not willfully violate copyright laws by creating copies of legally purchased video cassettes and renting those copies while retaining originals to guard against theft, based on testimony that he never simultaneously rented both copy and original).

(144.) Pub. L. No. 105-147, [sections] 2(b), 111 Stat. 2678 (1997) (amending 17 U.S.C. [sections] 506(a)).

(145.) Section 109(a) provides: "the owner of a particular copy ... lawfully made under this rifle, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy" 17 U.S.C. [sections] 109(a) (1994).

(146.) Id. There must have been a lawful original sale of the work for the first sale doctrine to apply. See United States v. Larracuente, 952 F.2d 672, 673 (2d Cir. 1992) (shifting burden to government to prove copies not legally made nor owned by defendant after defendant has met production burden of [sections] 109 defense); United States v. Cohen, 946 F.2d 430, 433 (6th Cir. 1991) (requiting lawful sale to invoke first sale doctrine); United States v. Drum, 733 F.2d 1503, 1507 (8th Cir. 1984) (stating that government may prove absence of first sale either by evidence of source of the recordings, or by evidence that recordings were never authorized); Microsoft Corp. v. Harmony Computers & Elecs., 846 F. Supp. 208, 212 (E.D.N.Y. 1994) (holding that entering license agreement is not a "sale"). But see ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1453-55 (7th Cir. 1996) (holding "shrinkwrap" license, a package label limiting use of work, enforceable under state contract law, while not creating exclusive rights otherwise preempted by Copyright Act).

(147.) Sebastian Int'l, Inc. v. Consumer Contacts (PTY) Ltd., 847 F.2d 1093, 1099 (3d Cir. 1988). A district court in the Third Circuit has held that if copies of a work are lawfully made, but their distribution in the United States would infringe on a United States copyright owner's exclusive rights, then the mere act of importation constitutes a violation. T.B. Harms Co. v. Jem Records, Inc., 655 F. Supp. 1575, 1579 (D.N.J, 1987).

(148.) See L'anza Research Int'l, Inc. v. Quality King Distribs., Inc., 98 F.3d 1109, 1117 (9th Cir. 1996) (holding that the first sale doctrine, under 17 U.S.C. [sections] 109(a), does not bar defendant's liability under 17 U.S.C. [sections] 602(a) for re-importation of infringing goods lawfully sold abroad), rev'd, 118 S. Ct. 1125 (1998); see also BMG Music v. Perez, 952 F.2d 318, 319 (9th Cir. 1991) (stating that first sale doctrine does not provide defense to infringement by goods manufactured abroad). Interestingly, both L'anza and Sebastian involved hair-care products: the asserted copyright interest was in the bottle labels.

(149.) 118 S. Ct. 1125 (1998).

(150.) Id. at 1134 ("The whole point of the first sale doctrine is that once the copyright owner places a copyrighted item in the stream of commerce by selling it, he has exhausted his exclusive statutory right to control its distribution."). However, the Supreme Court did not address "cases in which the allegedly infringing imports were manufactured abroad." Id. at 1135 (Ginsburg, J., concurring). See generally Joan Biskupic, Court Lets Discounters Keep Selling U.S.-Made Goods They Buy Overseas, WASH. POST, Mar. 10, 1998, at A7 (noting concerns by U.S. manufacturers, including software and recording industries, that this decision would legitimize the multi-billion dollar "gray market" industry which undercuts their domestic marketing).

(151.) See Dr. Seuss Enters., L.P.v. Penguin Books USA, Inc., 109 F.3d 1394, 1399 (9th Cir. 1997) (applying the four elements of the fair use doctrine).

(152.) See Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569 (1994) (finding that song which would otherwise infringe on copyright was fair use as parody); Leibovitz v. Paramount Pictures Corp., 948 F. Supp. 1214, 1219 (S.D.N.Y. 1996), aff'd, 137 F.3d 109 (2d Cir. 1998) (rejecting claim that all commercial use of protected elements of copyrighted work is de facto infringement).

(153.) Leibovitz, 948 F. Supp. at 1221-24.

(154.) See Atari, Inc. v. North Am. Philips Consumer Elecs. Corp., 672 F.2d 607, 616-19 (7th Cir. 1996) (describing doctrine); Smith v. Jackson, 84 F.3d 1213, 1218-19 (9th Cir. 1996) (same).

(155.) See McDonald v. Multimedia Entertainment, Inc., 20 U.S.P.Q. 2d (BNA) 1372 (S.D.N.Y. 1991) (finding that single musical note or three-note sequence is too common to receive protection). See generally WILLIAM PATRY, THE FAIR USE PRIVILEGE IN COPYRIGHT LAW 63-64, 465-66 (1985).

(156.) See PATRY, supra note 155, at 468-77.

(157.) See, e.g., Computer Assoc. Int'l, Inc. v. Altai, Inc., 982 F.2d 693 (2d. Cir. 1992).

(158.) See Sega Enterprises, Ltd. v. Accolade, Inc., 977 F.2d 1510, 1514 (9th Cir. 1993) (holding that reverse engineering undertaken for legitimate purpose is "as a matter of law a fair use of the copyrighted work"). But see Atari Games Corp. v. Nintendo of America, Inc., 975 F.2d 832, 843 (Fed. Cir. 1992) ("The fair use reproductions of a computer program must not exceed what is necessary to understand the unprotected elements of the work.").

(159.) 473 U.S. 207 (1985).

(160.) 18 U.S.C. [sections] 2314 (1994).

(161.) See Dowling at 216. The defendants in Dowling taped, without authorization, commercially unreleased Elvis Presley performances and produced record albums. Id. at 214. The Supreme Court, citing the Copyright Act, concluded that Congress had not intended for the National Stolen Property Act to apply to copyright infringement. Id. at 221-27.

(162.) See, e.g., United States v. Belmont, 715 F.2d 459, 461 (9th Cir. 1983) (applying Act to interstate transportation of "off the air" copies of motion pictures); United States v. Drebin, 557 F.2d 1316, 1328 (9th Cir. 1977) (holding that copies of copyrighted motion pictures constitute goods, wares or merchandise, and thus fall within the meaning of the Act).

(163.) 18 U.S.C. [subsections] 1341, 1343 (1994).

(164.) See, e.g., United States v. Manzer, 69 F.3d 222, 229 (8th Cir. 1994) (using mail and telephone to sell unauthorized satellite decryption equipment); United States v. Shultz, 482 F.2d 1179, 1182 (6th Cir. 1973) (using mails to sell counterfeit sound recordings); Cooper v. United States, 639 F. Supp. 176, 180 (M.D. Fla. 1986) (using wires, specifically telephones, to distribute thousands of pirated sound recordings).

(165.) United States v. Wang, 898 F. Supp. 758, 760 (D. Colo. 1995).

(166.) Id.

(167.) 18 U.S.C. [subsections] 1961-1968 (1994).

(168.) See generally supra Part II.E. of this Article (discussing RICO); cf. United States v. Drum, 733 F.2d 1503, 1506 (11th Cir. 1981) (applying RICO to charges arising out of sound recording copyright infringement business); United States v. Sam Goody, Inc., 506 F. Supp. 380 (E.D.N.Y. 1981) (holding that repeat copyright infringers who satisfied RICO criteria could not avoid prosecution on the grounds they were not members of organized crime because RICO applies to any enterprise, both legal and illegal).

(169.) Pub. L. 104-153, [sections] 3, 110 Stat. 1386 (1996), (amending 18 U.S.C. [sections] 1961(1)).

(170.) 18 U.S.C.A. [sections] 1956(c)(7)(D) (Supp. 1998). For a further discussion of this statute, see the MONEY LAUNDERING article in this issue.

(171.) H.R. 2652, 105th Cong. (1997).

(172.) Id., [sections] 1201; see also 143 CONG. REC. E2000 (daily ed. Oct. 9, 1997) (introductory remarks of Rep. Coble).

(173.) H.R. 2652, 105th Cong. [sections] 1207(a).

(174.) 144 Cong. Rec. H3398-01.

(175.) 1997 US S.B. 2291 (SN)

(176.) H.R. 351, 104th Cong. (1996).

(177.) See Julius J. Marke, Database Protection Acts and the 105th Congress, N.Y.L.J., Mar. 18, 1997, at 5 (raising concerns that such legislation would (1) overrule Feist Publications, Inc. v. Rural Telephone Serv. Co., 499 U.S. 340 (1991); (2) protect factual data beyond scope traditionally contemplated by Congress and Supreme Court; (3) provide renewable terms amounting to perpetual copyright; and (4) create government monopolies over information).

(178.) See Legislation: Copyright Reforms Passed, But Major Patent Bill Is in Limbo as Session Ends, PAT., TRADEMARK & COPYRIGHT J. (BNA), at 101 (Dec. 4, 1997) (noting bill's potential delay due to researchers' concern that new database protection could hinder access to traditionally public information).

(179.) For a general overview of the elements of the criminal copyright offense, see supra Part IV.A.1. of this article.

(180.) Pub. L. No. 94-553, [sections] 101, 90 Stat. 2541-2589 (codified as amended in scattered sections of 17 U.S.C.).

(181.) 17 U.S.C. [sections] 101 (1994). The 1980 amendment to the 1976 Act places computer programs within the category of protected "literary works." Computer databases are also included in the category of "literary works." See H.R. REP. No. 94-1476, at 54, reprinted in 1976 U.S.C.C.A.N. 5659, 5667 (1975).

(182.) See Playboy Enter., Inc. v. Frena, 839 F. Supp. 1552, 1555 (M.D. Fla. 1993) (recognizing full copyright protection for digitized magazine pictures).

(183.) See Frank Music Corp. v. CompuServe Inc., C.A. No. 93 Civ. 8153 (JFK) (S.D.N.Y. Dec. 19, 1995). In an out-of-court settlement, defendant CompuServe agreed to compensate music publishers for prior use of the copyrighted songs. CompuServe also guaranteed that its music bulletin board managers would obtain licensing agreements for the future use of any copyrighted material, as well as pay royalties to the copyright holders. Matthew Goldstein, Accord Ends On-Line Suit Over Music, N.Y.L.J., Nov. 8, 1995, at 1; see also Alan J. Hartnick, 1st Mechanical License in Cyberspace, N.Y.L.J., Feb. 16, 1996, at 5 (discussing need for such licenses to protect copyrighted works).

(184.) The "Internet" refers to the on-line world and is used interchangeably with "cyberspace" and "Web." It is described as "an international network of interconnected computers" from which any number of users may access a "wide variety of communication and information retrieval methods." See Reno v. American Civil Liberties Union, 117 S. Ct. 2329, 2334 (1997) (explaining and adopting Internet terminology).

(185.) 18 U.S.C. [sections] 2319 (1994). Infringement of ten copies or phonorecords of one or more copyrighted works valued at more than $2,500 carries a maximum sentence of three years for a first offense and six for a second offense. Infringement of one or more copies or phonorecords which have a total retail value of more than $1,000 carries a maximum sentence of one year. 18 U.S.C. [sections] 2319(b) (1994) amended by Pub. L. No. 105-47, [sections] 2(d), 111 Stat. 2678, 2679 (1997).

(186.) 18 U.S.C. [subsections] 2319, 2319A(1994).

(187.) The White House created the National Information Infrastructure Task Force ("IITF") in February 1992 to investigate regulatory needs for the on-line word. The IITF then formed the Working Group on Intellectual Property to examine the intellectual property implications of the National Information Infrastructure ("NII"). On July 7, 1994, the Working Group released a preliminary draft of its report, known as the "Green Paper." Following testimony and public comments on this draft, the Working Group released in September 1995 a final version of the report, known as the "White Paper." Its main finding was that "with no more than minor clarification and limited amendment the Copyright Act will provide the necessary balance of protection of rights." WORKING GROUP ON INTELLECTUAL PROPERTY RIGHTS, INTELLECTUAL PROPERTY AND THE NATIONAL INFORMATION INFRASTRUCTURE 17 (1995) [hereinafter "WHITE PAPER" ].

Several commentators have criticized the authors of the White Paper for overbreadth and lack of technical knowledge. See Andrew Grosso, Copyright and the Internet: A Footnote, A Sleight of Hand, and a Call to Reason, FED. LAW., Jan. 1997, at 44 (arguing that White Paper definitions make "mere viewing" over the Interne unlawful); Joseph V. Myers III, Speaking Frankly About Copyright Infringement on Computer Bulletin Boards: Lessons to Be Learned from Frank Music, Netcom and the White Paper, 49 VAND. L. REV. 439, 450-62 (1996) (criticizing White Paper for overstating liability contemplated by Copyright Act and distinguishing display from reproduction with regard to on-line violations of the Act); Pamela Samuelson, The Copyright Grab, 4.01 WIRED 135 (1996) (criticizing White Paper for misrepresenting judicial copyright precedent and extending copyright protection beyond traditional commercial applications); Pamela Samuelson, Intellectual Property Issues Raised by the National Information Infrastructure, PRACTISING LAW INSTITUTE, PATENTS, COPYRIGHTS, TRADEMARKS AND LITERARY PROPERTY COURSE HANDBOOK SERIES, 454 PLI/PAT 43, 48, 56-57 (1996); see also EDWARD A. CAVAZOS & GAVINO MORIN, CYBERSPACE AND THE LAW 48 (1994) (discussing copyright protection issues raised by Internet); LANCE ROSE, NETLAW 83 (1995) (arguing that United States intellectual property laws have evolved along with technology and can protect intellectual property rights of owners in cyberspace); Eric Schlachter, The Intellectual Property Renaissance in Cyberspace: Why Copyright Law Could Be Unimportant on the Internet, 12 BERKELEY TECH. L.J. 15, 32 (1997) (analyzing deficiencies of traditional copyright concepts with regard to Internet conventions and use).

(188.) See 17 U.S.C. [sections] 109(a) (1994) (allowing the owner of a "particular copy or phonorecord lawfully made ... or any person authorized by such owner" to, without copyright owner's authority, "sell or otherwise dispose of the possession of that copy or phonorecord").

(189.) Downloading is the act of retrieving or accessing any information over the Internet. By way of contrast, "uploading" denotes placing files onto a server from which they may be accessed by anyone browsing the Web.

(190.) If the downloader is the equivalent of a record buyer, then, just as the latter may legally turn around and resell her copy of the record, the former may resell whatever she downloaded. The difference between the two scenarios is that the record seller sacrifices her copy of the record, whereas the downloader likely retains a copy of what she downloaded. WHITE PAPER, supra note 187, at 95.

(191.) WHITE PAPER, supra note 187, at 95. Alternatively, copyright management systems can be used as a means for circumventing or monitoring subsequent use of downloaded programs. See Elizabeth Corcoran, Digital Information Protection Proposed; Device Would Stop Electronic Duplication, WASH. POST, Feb. 20, 1998, at G3 (noting concerns that such devices would not allow for fair use doctrine).

(192.) 17 U.S.C. [sections] 506(a) (1994) amended by Pub. L. No. 105-339, [sections] 2(b), 111 Stat. 2678 (1997).

(193.) 17 U.S.C. [sections 506(a) (1994) amended by Pub. L. No. 105-339, [sections] 2(b), 111 Stat. 2678 (1997).

(194.) In contrast, a finding of civil copyright vicarious liability requires only that the defendant be in a position to control the use of the copyrighted works and had authorized such use without the owner's permission. Sony Corp. v Universal City Studios, Inc. 464 U.S. 417, 437 (1984). See generally MELVILLE B. NIMMER & DAVID NIMMER, NIMMER ON COPYRIGHT: A TREATISE ON THE LAW OF LITERARY, MUSIC AND ARTISTIC PROPERTY, AND THE PROTECTION OF IDEAS [sections] 12.04(A)(2)(a) (1997).

(195.) The entity that runs the on-line system or service.

(196.) See Sega Enter. Ltd. v. Maphia, No. CIV. A. 93-4262 CW, 1997 WL 337558, at * 1 (N.D. Cal. June 9, 1997) (permanently enjoining BBS operator from "displaying, transferring or making available" copyrighted video games illegally copied by persons using BBS, upon finding owner knowingly facilitated infringement); Sega Enter. Ltd. v. Maphia, 857 F. Supp. 679, 683 (N.D. Cal. 1994) (holding defendant Sysop liable because it operated electronic bulletin board to which users uploaded plaintiff's copyrighted games, while other users downloaded them, and defendant had specific knowledge of, and at times even solicited, infringing actions); Playboy Enter. v. Frena, 839 F. Supp. 1552, 1556-57 (M.D. Fla. 1993) (holding operator of computer BBS, which was accessible to customers for fee, liable for copyright infringement because users had downloaded plaintiff's unauthorized pictures); see also Playboy Enter. v. Russ Hardenburgh Inc., 982 F. Supp. 503, 511-12 (N.D. Ohio 1997) (collecting cases discussing direct or contributory infringement by BBS Sysop for allegedly displaying and distributing copyrighted documents placed on-line by subscribers). But see infra notes 199-202 and accompanying text (offering reasons why Sysops should not be held liable for infringing activity occurring on their networks).

(197.) 17 U.S.C. [sections] 506(a) (1994) amended by Pub. L. No. 105-339, [sections] 2(b) 111 Stat. 2678 (1997).

(198.) To hold a party liable for contributory infringement, the government must prove that the system provider induced, caused, or substantially contributed to the infringing conduct. Casella v. Morris, 820 F. 2d 362, 365 (11th Cir. 1987); see also NIMMER & NIMMER, supra note 194, [sections] 12.04(A)(2)(a).

(199.) See generally I. Trotter Hardy, The Proper Regime for "Cyberspace," 55 U. PITT. L. REV. 993 (1994) (analyzing whether on-line service providers ought to be exempt from liability or given a higher standard for liability if, for example, they are ignorant of, or unable to prevent, illegal behavior by users).

(200.) 907 F. Supp. 1361 (N.D. Cal. 1995).

(201.) See id. at 1374 (holding liability might exist where provider fails to remove infringing works after receiving notice of posting on network).

(202.) See id. at 1369. The On-Line Copyright Infringement Liability Limitation Act, H.R. 3209, 105th Cong. (1998) was introduced in February 1998 to codify Netcom and to overrule Playboy Enter. v. Frena, 839 F. Supp. 1552 (M.D. Fla. 1993) (discussed supra note 196); The act has since been signed into law. See infra notes 206-23 and accompanying text.

(203.) WHITE PAPER, supra note 187, at 228-29. The requirement led the Working Group to conclude that current copyright law is "insufficient to prevent flagrant copyright violations in the NII context." Id. at 127-28.

(204.) 871 F. Supp. 535 (D. Mass. 1994).

(205.) Id. at 537.

(206.) Pub. L. No. 105-339, [sections] 2(b), 111 Stat. 2678 (1997) (amending 17 U.S.C. [sections] 506(a)).

(207.) Pub. L. No. 105-339, [sections] 2(c), 111 Stat. 2678 (1997) (amending 17 U.S.C. [sections] 507(a)).

(208.) See David McCandless, Warez Wars, 5.04 WIRED 133, 134-35 (1997) (discussing business efforts to combat Warez Sites and Warez culture).

(209.) Id. at 135 ("Warez crackers, traders, and collectors don't pirate software to make a living: they pirate software because they can. The more the manufacturers harden a product with tricky serial numbers and anticopy systems, the more fun it becomes to break.").

(210.) See generally Brace G. Joseph, The New WIPO Copyright and Phonograms Treaties: Twenty-One Days in Geneva and the Return to Washington, in GLOBAL TRADEMARK AND COPYRIGHT: PROTECTING INTELLECTUAL PROPERTY RIGHTS IN THE INTERNATIONAL MARKETPLACE, 488 PLI/PAT 371 (1997) (describing outcome of WIPO meeting); Pamela Samuelson, The U.S. Digital Agenda at WIPO, 37 VA. J. INT'L L. 369 (1997) (same).

(211.) Religious Tech. Ctr. v. Netcom On-Line Communication Serv., Inc., 901 F. Supp. 1361, 1361 (N.D. Cal. 1995); see also supra notes 200-02 and accompanying text.

(212.) Digital Millennium Copyright Act, Pub. L. No. 105-304, 112 Stat. 2877 (1998).

(213.) Pub. L. No. 105-304, 112 Stat. 2877 (1998) (amending 17 U.S.C. [sections] 511, adding [sections] 512.); H.R. 2180, 105th Cong., [sections] 2 (1997); see also Legislation: Bill Would Limit Liability for Infringement Occurring On-Line, Pat., Trademark & Copyright J. (BNA), at 231, 244-46 (July 24, 1997) (describing contents of and justification for H.R. 2180).

(214.) The statute defines a service provider, as used in subsection (a) of the statute, as "an entity offering the transmission, routing, or providing or connections for digital online communications, between or among points specified by a user, or material of the user's choosing, without modification to the content of the material as sent or received." 17 U.S.C. [sections] 512(k)(1)(A). For all other subsections in the statute "the term `service provider' means a provider of online services or network access, or the operator of facilities therefor, and includes an entity described in subparagraph (A)." 17 U.S.C. [sections] 512(k)(l)(B).

(215.) 17 U.S.C. [sections] 512(a) (1998). Such liability exemption will only apply, however, if:
 (1) the transmission of the material was initiated by or at the direction
 of a person other than the service provider; (2) the transmission ... is
 carried out through an automatic technical process without selection by the
 service provider; (3) the service provider does not select the recipients
 of the material except as an automatic response to the request of another
 person; (4) no copy of the material made by the service provider ... is
 maintained on the system or network in a manner ordinarily accessible to
 anyone other than anticipated recipients ... for a longer period that is
 reasonably necessary for the transmission; (5) the material is transmitted
 through the system or network without modification of its content.


17 U.S.C.A. [sections] 512(a) (West Supp. 1998).

(216.) 17 U.S.C.A. [sections] 512(c)(1)(A)(i), (ii), (c)(1)(B) (West Supp. 1998).

(217.) 17 U.S.C. [sections] 512(c)(1)(A)(iii), (c)(1)(C) (1998). However such limitations on liability are contingent upon the provider's designation of an agent to receive notifications of such infringement and making contact information available through its service. 17 U.S.C.A. [sections] 512(c)(2) (West Supp. 1998).

(218.) 17 U.S.C.A. [sections] 512(0(1), (2) (West Supp. 1998).

(219.) See 17 U.S.C.A. [sections] 512(g)(2) (West Supp. 1998) (discussing an exception under which a service provider could be liable for taking down material).

(220.) 17 U.S.C.A. [sections] 512(g)(1) (West Supp. 1998).

(221.) 17 U.S.C.A. [sections] 512(e) (West Supp. 1998).

(222.) 17 U.S.C.A. [sections] 512(h) (West Supp. 1998).

(223.) 17 U.S.C.A. [sections] 5120) (West Supp. 1998).

(224.) 35 U.S.C. [sections] 292 (1998); see also Boyd v. Schildkrant Giftware Corp., 936 F.2d 76, 79 (2d Cir. 1991) (finding that impermissibly placing patent number on product by mistake does not constitute violation of false patent marking statute); cf. Arcadia Mach. & Tool v. Sturm, Ruger & Co., 786 F.2d 1124, 1125 (Fed. Cir. 1986) (holding that label declaring contents of package "may be manufactured under" one or more listed patents or pending applications did not violate false patent marking statute when box was used for various models).

(225.) Filmon Process Corp. v. Spell-Right Corp., 404 F.2d 1351, 1355 (D.C. Cir. 1968).

(226.) 35 U.S.C. [sections] 292(a) (1994).

(227.) 35 U.S.C. [sections] 292(a) (1994).

(228.) 35 U.S.C. [sections] 292(a) (1994); see also Boyd, 936 F.2d at 79 (holding that cosmetic compact case manufacturer who misunderstood instructions to delete reference of patent holder's patent number and shipped compacts with holder's number had not intended to deceive). But see Johnston v. Textron, Inc., 579 F. Supp. 783, 795-96 (D.R.I.), aff'd, 758 F.2d 666 (1984) (finding use of word "patented" in connection with radio advertising of unpatented article after being notified by patent holder of such false marking activity violated statute).

(229.) 18 U.S.C. [sections] 497 (1994).

(230.) 18 U.S.C. [sections] 497 (1994).

(231.) 18 U.S.C. [sections] 2314 (1994).

(232.) 473 U.S. 207 (1985).

(233.) Id. at 227; see also United States v. LaMacchia, 871 F. Supp. 535,537 (D. Mass. 1994) ("Dowling is a narrower case than [defendant] would have it, and holds only that copyright infringement does not satisfy the physical `taking' requirement of the National Stolen Property Act.").

(234.) See Dowling, 473 U.S. at 216 (finding that National Stolen Property Act clearly "contemplate[s] a physical identity between the items unlawfully obtained and those eventually transported" and finding language of copyright statutes to clearly distinguish possessory interests of copyright holder from ordinary property interests); see also Naso v. Park, 850 F. Supp. 264, 275 (S.D.N.Y. 1984) (holding that patent-infringing goods do not qualify under statute as stolen, converted or fraudulently-taken goods).

(235.) For the purpose of this section, the term "art crime" will be limited to fine arts such as paintings, sculptures and, to a lesser degree, books, antiquities and archaeological objects. Related statutes include the Native American Graves Protection Act of 1990 and the Archeological Resources Act.

(236.) See Michael James, Internet May Shed Light on Shadowy Art Thieves; FBI and Interpol to Display Stolen Works on Web Sites, BALTIMORE SUN, Aug. 17, 1998, at 1A (citing Art Loss Register's estimates of $3 billion of stolen, unaccounted artworks, numbering over 100,000); Christine Spolar, Antiques Up for Grabs in Budapest: Hungarian Families Vie to Sell Heirlooms to Posh Galleries, WASH. POST, Dec. 31, 1997, at A17 (discussing natural growth in illicit art trade when prices escalate and currency falters and warning that "[a]s prices soar, the potential for fraud multiplies"); see also David Holmstrom, Stolen-Art Market Is a Big Business at $2 Billion A Year, CHRISTIAN SCI. MONITOR, Aug. 11, 1994, at 1; William Touhy, Picture This: Art Thievery is Thriving, L.A. TIMES, Aug. 16, 1994, at H1.

(237.) See Steve Lopez with Charlotte Faltermeyer, The Great Art Caper: Is the Heist of the Century about to Be Solved? Two Cons May Hold the Answer, TIME MAG., Nov. 17, 1997, at 74 (tracing recent developments in recovery efforts of nine works valued at $300 million stolen from Boston's Gardner Museum in 1990); cf. Anthony J. Del Piano, The Fine Art of Forgery, Theft and Fraud, CRIM. JUST., Summer 1993 at 16, 17 (contending that art theft is second only to illicit drug market).

(238.) Theft and vandalism of art, despite their often tremendously costly and devastating effects, usually do not demand the degree of sophistication that characterizes white collar crime; however, the subsequent resale or laundering of stolen art, a major element of white collar art crime, is complex and sophisticated. See Del Piano, supra note 237, at 18 (noting that trafficking of stolen art transforms simple thefts into complex criminal enterprises). For review and discussion on the use of civil actions to seek relief in art crimes, see generally Steven A. Bibas, Note, The Case Against Statutes of Limitations for Stolen Art, 103 YALE L.J. 2437 (1994), in which the author rejects property approaches to art crimes and argues for the elimination of statutes of limitation for victims who report art thefts. See also Ashton Hawkins, et al., A Tale of Two Innocents: Creating an Equitable Balance Between the Rights of Former Owners and Good Faith Purchasers of Stolen Art, 64 FORDHAM L. REV. 49 (1995) (advocating legislative encouragement of international arts registry to establish rights and liability limitations for purchasers of valuable art); William G. Pearlstein, Claims for the Repatriation of Cultural Property: Prospects for a Managed Antiquities Market, 28 LAW & POL'Y INT'L BUS. 123 (1996) (analyzing patrimony claims and proposing managed antiquities market). Ongoing investigations into World War II looting has vaulted consideration of this issue to the forefront of the art world.

(239.) See Julie K.L. Dam, et al., The Faking Game Demand Keeps Growing for Big-Name Art--and Brazen Forgers are Happy to Provide and Endless Supply, TIME INT., Mar. 10, 1997, at 50 (citing former New York Metropolitan Museum of Art director's estimate that "half forgeries" and "outright fakes" comprise nearly half the art on the market); Alycen Mitchell, Seeing Red over Riopelle: Art Dealers and Collectors are Getting Badly Burned by Forgeries of his Work, FIN. POST, Nov. 22, 1997, at 30 (discussing first picture forger convicted in Canada amidst wave of fake Riopelles). See generally LEE CATTERALL, THE GREAT DALI ART FRAUD AND OTHER DECEPTIONS (1992); THOMAS HOVING, FALSE IMPRESSIONS: THE HUNT FOR BIG-TIME ART FAKES (1996); JAMES KOOBATIAN, FAKING IT: AN INTERNATIONAL BIBLIOGRAPHY OF ART AND LITERARY FORGERIES, 1949-1986 (1987).

(240.) For example, the Drug Enforcement Agency (DEA) staged "Operation Dinero" to uncover money laundering by the Cali Columbia drug cartel, netting three paintings attributed to Picasso, Rubens and Reynolds. See Anna J. Kisluk, DEA Operation Nets 3 Pictures, IFAR REP., Dec. 1995, at 6, 8; see also Antony Thorncroft, Landscape of Larceny, FIN. POST, March 15, 1997, at 26 (describing botched attempts to sell $170 million worth of Old Masters taken in the Russborough heist leading to use of paintings as collateral for other crimes); Customs Auction of a Dali Accents Laundering by An, MONEY LAUNDERING ALERT, June 1, 1995 (noting the "large disparity between cash bank deposits made by auction houses and cash receipts reported by them on IRS Form 8300"); Jo Durden-Smith, Masterpieces as Money, TOWN & COUNTRY MONTHLY, July 1, 1996, at 30 (concluding that art works are just another form of money). For a general discussion of money laundering, see the MONEY LAUNDERING article in this issue.

(241.) "[Thirty to forty] per cent of the world's available antiquities pass through the sale rooms in New York and London. Roughly [ninety] per cent of these pieces are of unknown provenance, meaning they are almost certainly stolen, smuggled, or both." Richard McGill Murphy, A Corrupt Culture, NEW LEADER, Feb. 23, 1998, at 15 (reviewing Peter Watson's SOTHEBY'S: THE INSIDE STORY, a scathing expose of the reputed auction house). Sotheby's reactions to such claims have been startling: "Sotheby's was breaking no laws selling smuggled material. We are here to make money," explained former London managing director. Julie Rekai Rickerd, Revealing the Rot of a Venerable Auction House, FIN. POST, Feb. 21, 1998, at R5. Watson also accused Sotheby's of creating a false market by manufacturing telephone bids to increase floor auction prices. Id.; see also Lisa J. Borodkin, Note, The Economics of Antiquities Looting and a Proposed Legal Alternative, 95 COLUM. L. REV. 377, 385-86 (1995) (discussing ways in which art auction system contributes to perpetration of art fraud).

(242.) See JOHN E CONKLIN, ART CRIME 21-33 (1994), at 87 (asserting that art fraud can be perpetrated by collectors, dealers, museums, and auction houses alike); Steven F. Grover, Note, The Need for Civil-Law Nations to Adopt Discovery Rules in Art Replevin Actions: A Comparative Study, 70 TEX. L. REV. 1431, 1438 (1992) (asserting that some reputable museum staffers may be tempted by lucrative corruption).

(243.) See, e.g., CONKLIN, supra note 242, at 61 (estimating "Dali signed 350,000 blank sheets of art paper in his career," to make inexpensive photographic reproductions, which were then marketed as high-priced "originals" or "limited editions").

(244.) But see Kramer v. Pollock-Krasner Found., 890 F. Supp. 250 (S.D.N.Y. 1995) (rejecting dealer's allegation of conspiracy by authenticators in refusing to authenticate his alleged Pollock painting); Vitale v. Marlborough Gallery, 32 U.S.P.Q. 2d (BNA) 1283 (S.D.N.Y. 1994) (dismissing purchaser of alleged Pollock painting's claim that authenticators and dealers conspired in refusing to authenticate his painting).

(245.) See Steven Mark Levy, Liability of the Art Expert for Professional Malpractice, 1991 Wis. L. REV. 595, 596 ("Fine arts experts, including authenticators, appraisers and consultants, wield tremendous financial power in the art market.").

(246.) Denise M. Topolnicki & J. Howard Green, The Fine Art of Fraud, MONEY, Sept. 1986, at 73. Furthermore, there is no simple either-or dichotomy between authentic and fake art works. See R.H. MARIJNISSEN, PAINTINGS, GENUINE, FRAUD, FAKE: MODERN METHODS OF EXAMINING PAINTINGS 20-34 (1985) (listing fifteen categories of "authenticity").

(247.) See Lawrence S. Bauman, Note, Legal Control of the Fabrication and Marketing of Fake Paintings, 24 STAN. L. REV. 930, 935-36 (1972) (pointing out the unavailability of art experts for the purposes of authentication's and providing several reasons for this problem). For examples of high-priced scientific authentication techniques, see David Conrads, Progress is Real for Those in the Business of Spotting Fakes: Scientists and Art Historians are Erecting a Formidable Barrier Between Art Forgers and Art Museums, CHRISTIAN SCIENCE MONITOR, Oct. 8, 1996, at 12 and Leonard D. Du Boff, Controlling the Artful Con: Authentication and Regulation, 27 HASTINGS L.J. 973, 988-97 (1976).

(248.) See Mitchell, supra note 239, at 30 (explaining forgers' preference for modern art because its simpler style facilitates imitation and does not require complicated antiquating techniques).

(249.) See Robin Morris Collin, The Law and Stolen Art, Artifacts, and Antiquities, 36 How. L.J. 17, 27 (1993) (stating that consumers seldom inquire into legitimacy of art work); Topolnicki & Green, supra note 246, at 73 (pointing out that victims of many art frauds are usually novice collectors); cf. Balog v. Center Art Gallery-Hawaii, Inc., 745 F. Supp. 1556, 1562 (D. Haw. 1990) ("[S]ome well-executed fakes have fooled even knowledgeable buyers and dealers."); Bauman, supra note 247, at 932-34 (citing numerous methods of forgery, such as faked signatures, completions of unfinished canvases, misrepresentation of a work's author, reproductions, pastiches [a method of combining elements of several works to create a new work], and faked unfinished drawings).

(250.) See, e.g., Stephen K. Urice, World War II and the Movement of Cultural Property: and Introduction and Brief Bibliography for the Museum Administrator, LEGAL PROBLEMS OF MUSEUM ADMINISTRATION, ALI-ABA COURSE OF STUDY MATERIALS, March 26, 1998 (listing books and websites to consult when researching potential acquisitions).

(251.) The Art Loss Register ("AIR") maintains an international, permanent, computerized clearinghouse on stolen and missing art; their image database of over 60,000 items has been instrumental in the recovery of numerous stolen objects. For more information regarding AIR, see The Art Loss Register (visited Jan. 29, 1999) <http://www.artloss.com/>. Additionally the International Foundation for Art Research ("IFAR"), a non-profit organization dedicated to preventing and recovering stolen, forged and misattributed art works, maintains the AIR's U.S. office and can be reached at 500 Fifth Avenue, Suite 1234, New York, NY 10110 (tel. 212-391-6234; fax 212-391-8794; email alrnewyork@aol.com). See generally Barbara Lantin, The Art of Helping Police with Inquiries, INDEPENDENT (London), Apr. 3, 1996 (discussing role of the Art Loss Register).

(252.) The Getty Information Institute, Los Angeles, has established the "Getty Provenance Index" which documents the provenance (history of ownership) of over a half-million art works, which are ceded by means of their "Object ID Checklist." This database is currently on a CD-ROM. See Getty Information Institute, The Work of the Getty Provenance Institute (visited Jan. 29, 1999) <http://www.gii.getty.edu/provenance/index.html>.

(253.) A San Francisco high-technology firm has developed a digital registration process, "ISIS," (Intrinsic Signature Identification System) that could help resolve disputes about authenticity and ownership of art works, thereby discouraging forgery and theft. The process is "based on the premise that all objects contain unique microscopic physical features and random anomalies that cannot be duplicated." Suzanne Muchnic, Have Forgers Finally Met Their Match? A New Digital Registration Process Could Discourage Forgery and Theft and Help Resolve Disputes About Authenticity and Ownership of Valuable Artworks, L.A. TIMES, Jul. 2, 1995, at Calendar 50 (concluding that success of this project remains uncertain). For further information on ISIS, see Verification Technologies, Inc., Main Page (visited Jan. 29, 1999) <http://www.netventure.com/vti/isis>.

(254.) See Bauman, supra note 247, at 931 (asserting that existing state and federal regulatory attempts to control art crime frequently fail since available statutes for prosecution of art crime are primarily intended for other purposes, thus requiring creative tailoring to be of much use); Du Boff, supra note 247, at 998 (stating that such statutes may also be ineffective because their penalties are insufficient deterrents in light of the potential profits). Faced with this statutory futility, prosecutors frequently choose not to waste precious funds and time on a losing baffle. See also Balog, 745 F. Supp. at 1564 (stating that a dealer's authentication of a work, unless that dealer witnessed work being produced, "can never be more than an educated guess or opinion"); Du Boff, supra note 247, at 998 (asserting that intent requirement for fraudulent authentication may encourage sellers to intentionally not authenticate works).

(255.) Pub. L. 103-322, Title XXXII, Subtitle I, [sections] 320902(a), 108 Stat. 1796, 2123-24 (1994) (codified at 18 U.S.C. [sections] 668 (1994)). The Act appears as part of the much larger "Violent Crime Control and Law Enforcement Act of 1994." There appears to be no legislative history specifically addressing the art crime statute.

(256.) "Object of cultural heritage" is defined to include any object that is either (a) over 100 years old and worth over $5,000, or (b) worth at least $100,000, regardless of age. 18 U.S.C. [sections] 668(a)(2) (1994).

(257.) Museum is defined broadly enough to include most libraries; the Act protects any organized and permanent institutions that (a) are in the United States; (b) are "established for an essentially educational or aesthetic purpose;" (c) have a professional staff; and (d) own and regularly display to the public tangible objects. 18 U.S.C. [sections] 668(a)(1) (1994).

(258.) 18 U.S.C. [sections] 668(b)(2) (1994).

(259.) Pub. L. No. 103-322, Title XXXII, Subtitle I, [sections] 320902(b), 108 Stat. 1796, 2124 (1997) (codified at 18 U.S.C. [sections] 3294 (1994)).

(260.) See Patty Gerstenblith, Cultural Property and World War II: Some Implications for American Museums: A Legal Background, LEGAL PROBLEMS OF MUSEUM ADMINISTRATION, ALI-ABA COURSE OF STUDY MATERIALS, March 26, 1998, at 20 (discussing judicial side-stepping of traditional statute of limitations in order to facilitate art recovery).

(261.) See Joseph A. Slobodzian, Case of the Missing History; FBI Recovers Artifacts Worth $3 Million; Electrician, Janitor Charged, WASH. POST, Jan. 8, 1998, at B7 (describing stolen objects, including artifacts from Revolutionary War and Civil War eras).

(262.) See United States v. O'Higgins, No. 98 CR. 358(RPP), 1998 WL 698272 (S.D.N.Y. Oct. 6, 1998) (rejecting defendant's commerce clause challenge to [sections] 668 for theft of one leaf from a Mozart piano minuet and an essay and three letters by Richard Wagner).

(263.) Cr. No. 89-00125-03-HM (D. Haw. May 4, 1990), aff'd, Nos. 90-10612, 90-10616, 90-10617, 1993 WL 118176 (9th Cir. Apr. 15, 1993).

(264.) See 18 U.S.C. [sections] 1341 (1994) (discussing mail fraud); 18 U.S.C. [sections] 1343 (1994) (discussing wire fraud).

(265.) The gallery's president was fined $750,000 and given a three-year prison sentence, and the vice-president was fined $282,000 and given a two-and-a-half year prison sentence. They were also ordered to pay restitution. CONKLIN, supra note 242, at 83. See generally CATTERALL, supra note 239, at 163-328 (reviewing development of Center Art Galleries frauds).

(266.) See Art Gallery, Officers Convicted in Dali Case, NAT'L. L.J., May 21, 1990, at 6 (deeming scandal "the largest art fraud in history at a consumer loss of more than $100 million from 1977 to 1989").

(267.) In addition, civil litigation based upon the same conduct paralleled the criminal prosecution. Granat v. Center Art Galleries, No. 91-7252 (RLC), 1993 WL 403977, at *2 (S.D.N.Y. Oct. 6, 1993); Balog v. Center Art Gallery-Hawaii, 745 F. Supp. 1560, 1569 (D. Haw. 1990).

(268.) No. [subsections] Cr. 722 (MBM) (S.D.N.Y. 1990); see also United States v. Burke, 718 F. Supp. 1130 (S.D.N.Y. 1989) (holding evidence admissible despite overly broad search warrant). 269. CATTERALL, supra note 239, at 96.

(270.) Arnold H. Lubasch, U.S. Accuses 4 of High Profits in Fake Dali Art, N.Y. TIMES, OCt. 4, 1988, at B6; see also Marianne Yen, 4 Charged in Dali Art Fraud, WASH. POST, Oct. 4, 1988, at D1.

(271.) See United States v. Amiel, 813 F. Supp. 958 (E.D.N.Y.), aff'd 995 F.2d 367 (2d Cir. 1993) (involving the government prosecution of forgers and dealers of the forgeries, including four members of the Amiel family for mail fraud and conspiracy). The defendants were running what was reputed to be "the single largest worldwide source and distribution network of bogus prints." David S. Hilzenrath, Cracking Down on Counterfeit Art; U.S. Charges 4 in the Global Distribution of Bogus Prints, WASH. POST, Jan. 31, 1992, at C1. A dealer of the Amiel works also pled guilty to mail fraud. Id.

(272.) See Bauman, supra note 247, at 939 (noting limited use of copyright laws in art crimes prosecution).

(273.) Id.

(274.) Nov. 14, 1970, 823 U.N.T.S. 231, 10 LL.M. 289. See generally ELIZABETH SIMPSON, THE SPOILS OF WAR; WORLD WAR II AND ITS AFTERMATH: THE LOSS, REAPPEARANCE, AND RECOVERY OF CULTURAL PROPERTY 272-311 (1997) (setting forth relevant treaties).

(275.) The 1970 UNESCO Convention was implemented into U.S. law by the Convention on Cultural Property Implementation Act ("CPIA"), Pub. L. 97-416, Title III, 96 Stat. 2329, 2350 (1983) (codified at 19 U.S.C. [subsections] 2601-2613 (1994)). Because the CPIA mainly restricts the importation of illegally imported foreign cultural property and only affords redress to foreign state parties to the UNESCO convention, it does not provide private causes of action and is thus "limited to an extremely small ... subset of potential claims." See Hawkins et. al., supra note 238, at 83. See generally Lawrence M. Kaye, The Future of the Past: Recovering Cultural Property, 4 CARDOZO J. INT'L & COMP. L. 23, 24-25 (1996) (discussing history of international response to illicit trade in cultural property); Marilyn Phelan, A Synopsis of the Laws Protecting Our Cultural Heritage, 28 NEW ENG. L. Rev. 63, 98 (1993) (discussing enactment, purpose, and scope of CPIA).

(276.) 19 U.S.C. [sections] 2602(a) (1994).

(277.) 19 U.S.C. [sections] 2605 (1994).

(278.) See generally Carl Nagin, Hot Art: Illegal Traffic in Antiquities, TOWN & COUNTRY MONTHLY, Mar. 1, 1995, at 138 (discussing effectiveness of committee despite its "cumbersome bureaucratic process").

(279.) Final Act of the Diplomatic Conference for the Adoption of the Draft UNIDROIT Convention on the International Return of Stolen or Illegally Exported Cultural Objects, June 24, 1995, 34 I.L.M. 1322 [hereinafter UNIDROIT]. The final title of the treaty is "UNIDROIT Convention on Stolen or Illegally Exported Cultural Objects."

(280.) UNIDROIT, supra note 279, at 1334-35, art. 10 (stating that provisions apply prospectively, not retroactively).

(281.) See List of the States Which Signed the Convention (visited Sep. 16, 1998) <http://www.tufts.edu/ departments/fletcher/multi/www/unidroit95-rat.html> (listing 22 signatories). As of January 1998, Lithuania, Paraguay, and Romania have ratified the UNIDROIT treaty while China and Ecuador have acceded to it. On January 21, 1998 the fifth ratification instrument was deposited by Romania with the Italian government. Consequently, pursuant to Article 12, paragraph 1 (UNIDROIT, Ch. 5, art. 12(1), 34 I.L.M. at 1335), the treaty will enter into force between these five nations on July 1, 1998. See Letter from Marina Schneider, Research Officer, Unidroit Secretariat (Feb. 12, 1998) (on file with the American Criminal Law Review) (noting "that Peru and Hungary have already passed the law permitting the ratification and we are waiting for the formal deposit of the instruments"); see also Richard P. Greenfield, The Trouble with the Trojan Gold, NEWSDAY (N.Y.), Jan. 7, 1996, at A38 (explaining why United States has abstained from voting on UNIDROIT convention); Kimbell to Host Swiss Collection: Paintings Find Temporary Sanctuary in Fort Worth, DALLAS MORNING NEWS, Jul. 5, 1997, at 43A (discussing problems in ratification process). For general discussion and analysis of UNIDROIT, see Marina Schneider, The UNIDROIT Convention on Stolen or Illegally Exported Cultural Objects (visited Sept. 16, 1998) <http://www.city.ac.uk/artspol/schneider. html>; see also Jennifer Howard, Objects of Desire; Contested Artifacts Are the Prize in an International Culture Clash, WASH. POST, Dec. 14, 1997, at C1 (describing inherent complications in repatriating artistic and cultural objects); Brian Bengs, Note, Dead on Arrival? A Comparison of the UNIDROIT Convention on Stolen or Illegally Exported Cultural Objects and U.S. Property Law, 6 TRANSNAT'L L. & CONTEMP. PROBS. 503 (1996) (analyzing potential effects of UNIDROIT on United States property law).

(282.) See, e.g., Godfrey Barker & Laura Stewart, The Arts: Maastricht--the Last Art Fair?, DAILY TELEGRAPH (London), Mar. 11, 1996, at 18 (claiming that if the Netherlands ratifies treaty, art dealers will move annual fair from Maastricht to non-ratifying country); Hawkins et al., supra note 238, at 86 ("[i]f adopted, UNIDROIT would effectively supplant the CPIA").

(283.) See, e.g., N.Y. ARTS & CULT. AFF LAW. [sections] 3.01 (McKinney 1984) (stating promotion of arts as statutory goal).

(284.) A person is guilty of class A misdemeanor criminal simulation when (1) with intent to defraud, he makes or alters any object in such manner that it appears to have an antiquity, rarity, source or authorship which it does not in fact possess; or (2) with knowledge of its tree character and with intent to defraud, he utters or possesses an object so simulated. N.Y. PENAL LAW [sections] 170.45 (McKinney 1984). The New York statute "substantially adopts a similar provision of the MODEL PENAL CODE (9 224.2)." Staff Notes of the Commission on Revision of the Penal Law, N.Y. PENAL LAW [sections] 170.45.

(285.) Former N.Y. PENAL LAW [sections] 959 was aimed at "[the] reproduction or forgery of archeological objects." Staff Notes of the Commission on Revision of the Penal Law, N.Y. PFNAL LAW [sections] 170.45 (McKinney 1984).

(286.) N.Y. PENAL LAW [sections] 170.45; see also N.Y. ARTS & CULT. AFF. LAW [sections] 13.03 (McKinney Supp. 1997) (falsifying certificates of authenticity for a work of fine arts is a class A misdemeanor).

(287.) See ALA. CODE [sections] 13A-9-10 (1995); ALASKA STAT. [sections] 11.46.530 (Michie 1996); ARIZ. Rev. STAT. ANN. [sections] 13-2004 (West 1989); ARK. CODE ANN. [sections] 5-37-213 (Michie 1993); COLO. Rev. STAT. [sections] 18-5-110 (1990); CONN. GEN. STAT. ANN. [sections] 53a-141 (West 1994); FLA. STAT. ch. 267.13 (1993); [sections] GUAM CODE ANN. [sections] 46.16 (1995); HAW. Rev. STAT. [sections] 708-855 (1993); IOWA CODE [sections] 715A.3 (1997); KY. Rev. STAT. ANN. [sections] 516.110 (Banks-Baldwin 1995); ME. Rev. STAT. ANN. tit. 17A, [sections] 705 (West 1983); Miss. CODE ANN. [sections] 39-7-27 (1996); Mo. Rev. STAT. [sections] 570.090 (1979); MONT. CODE ANN. [sections] 22-3441 (1995); NEB. Rev. STAT. [sections] 28-606 (1995); N.H. Rev. STAT. ANN. [sections] 227-C:17 (1989); N.J. STAT. ANN. [sections] 2C:21-2 (West 1995); Omo Rev. CODE ANN. [sections] 2913.32 (Anderson 1996); OR. Rev. STAT. [sections] 165.037 (1995); 18 PA. CONS. STAT. ANN. [sections] 4102 (1983 & Supp. 1997); S.D. CODIFIED LAWS ANN. [sections] 1-20-37 (Michie 1992); TENN. CODE ANN [sections] 39-14-115 (1997); TEX. CODE ANN. [sections] 32.22 (1994); UTAH CODE ANN. [sections] 76-6-518 (1995 & Supp. 1997); VT. STAT. ANN. tit. 13, [sections] 2023 (Supp. 1996); WIS. STAT. ANN. [sections] 943.38 (West 1996).

(288.) These three states are Florida, Montana, and South Dakota. See FLA. STAT. ch. 267.13 (1993) (limiting application to "any archaeological or historical object"); MONT. CODE ANN. [sections] 22-3-441 (1995) (limiting application to "heritage property or paleontological remains;"former refers to Native American objects); S.D. CODIFIED LAWS [sections] 1-20-37 (Michie 1992) (limiting application to "any archaeological, paleontological, ethnological or historical" object).

(289.) See CAL. CIVIL CODE [subsections] 1744(a)(10), 1745 to 1745.5 (West 1985 & Supp. 1997) (requiring disclosure of total size of limited editions with penalty not to exceed $1,000 for each violation); 815 ILL. COMP. STAT. [sections] 345/0.01-9 (West 1997) (same).

(290.) In February 1987, the New York Attorney General's Office obtained the first felony convictions in the nation against the operators of a telephone boiler-room gallery in its conspiracy prosecution of four defendants in the Carol Convertine Gallery case. See Topolnicki & Green, supra note 246, at 73. The defendants reached potential customers over the telephone and by mailing brochures and price lists and providing false certificates of authentication. Two defendants pleaded guilty to conspiracy, and two others were convicted of nine counts of fraud. One defendant was convicted of an additional eight misdemeanor counts for the issuance of the false certificates. See CONKLIN, supra note 242, at 82-83. The gallery was in part supplied by another member of the Amiel family. See Douglas C. McGill, Fake Art Prints: Big Business Getting Bigger, N.Y. TIMES, July 22, 1987, at A1; see also United States v. Amiel, 813 F. Supp. 958, 959 (E.D.N.Y. 1993) (describing the convictions obtained in that prosecution). In related civil litigation, a French corporation which claimed an exclusive license in Dali works filed a civil RICO suit, under 18 U.S.C. [sections] 1962(c) (enterprise involvement in racketeering), based on predicate acts of money laundering, mail fraud and wire fraud. See Galerie Furstenberg v. Coffaro, 697 F. Supp. 1282 (S.D.N.Y. 1988) (dismissing plaintiff's money laundering, conspiracy, and trademark claims, but allowing civil RICO suit based solely on mail and wire fraud acts).

(291.) See People v. Mahboubian, 543 N.E.2d 34, 36 (N.Y. 1989) (discussing defendants' attempts to defraud insurance company by staging theft of art forgeries and collecting on the value of authentic pieces); cf Bill Callahan, Art Dealer Sentenced in Wieghorst Swindle, SAN DIEGO UNION-TRIB., Sept. 27, 1989, at B3 (citing an unreported California case in which art dealer Louis Almeida was convicted on six counts of grand theft, carrying a sentence of up to seven and one half years in state prison, for selling forgeries of the paintings of Olaf Wieghorst).

(292.) U.S. SENTENCING GUIDELINES MANUAL App. A (1998) [hereinafter U.S.S.G.].

(293.) See U.S.S.G. [subsections] 3D1.1-3D1.5 (1998) (explaining calculation of single offense level for multi-count convictions).

(294.) 18 U.S.C.A. [sections] 1831 (a)(5) (Supp. 1998). As of Nov. 1, 1997, the Sentencing Guidelines were amended so that [sections] 2B1.1 covers offenses involving economic espionage under 18 U.S.C. [sections] 1831. Section 2B1.1 (b)(7) permits an increase by two levels for trade secret theft where the defendant knew or intended that it would benefit a foreign government, instrumentality, or agent. Sentencing Guidelines for the United States Courts, 62 Fed. Reg. 26,616 (1997) (amending U.S.S.G. [sections] 2B1.1) (proposed May 13, 1997); see U.S.S.G. App. C., Amend. 551 (1998).

(295.) 18 U.S.C.A. [sections] 1832(a)(5) (Supp. 1998). Section 2B1.1 also applies to thefts of trade secrets violations as defined under [sections] 1832. See discussion, supra note 294 (addressing amendment to [sections] 2Bl.1).

(296.) 18 U.S.C.A. [sections] 1834(a)(1) (Supp. 1998). The court may consider "the nature, scope, and proportionality of the use of the property in the offense." 18 U.S.C.A. [sections] 1834(a)(2) (Supp. 1998). The forfeiture provision has been likened to the forfeiture provision in RICO. Michael Coblenz, Criminal Punishment of Trade Secret Theft Under New Federal Law: The Economic Espionage Act of 1996, A.B.A. IP NEWSL., Spring 1997, at 11, 49.

(297.) 18 U.S.C.A. [sections] 1838 (Supp. 1998) (construction with other laws). The Act also contains provisions for injunctions. 18 U.S.C.A. [sections] 1836(a) (Supp. 1998) (civil proceedings to enjoin violations); see also Coblenz, supra note 296, at 49-50.

(298.) 18 U.S.C. [sections] 2314 (1994). Section 2314 was amended in 1994 to remove the outdated maximum fine. Pub. L. No. 103-322, Title XXXIII, [sections] 330016(1)(L), 108 Stat. 1796, 2147 (1994).

(299.) U.S.S.G. App. A (1998). For an application of this Act to a particular type of intellectual property crime, refer to the sentencing provisions of the applicable section of this article

(300.) U.S.S.G. [sections] 2B1.1(a), (b)(1) (1998).

(301.) U.S.S.G. [sections] 2B1.1(b)(1) (1998).

(302.) U.S.S.G. [sections] 2B1.1(b)(4)(A) (1998).

(303.) U.S.S.G. [sections] 2B1.(b)(4)(B) (1998); see also United States v. Collins, 104 F.3d 143, 144 (8th Cir. 1997) (upholding sentence increase of four levels for being in business of receiving and selling stolen goods, as defined by 18 U.S.C. [sections] 2314).

(304.) 18 U.S.C. [sections] 1905 (1994). The Act makes it a misdemeanor for any employee of the United States to disclose trade secrets "[t]o any extent not authorized by law." 18 U.S.C. [sections] 1905 (1994).

(305.) U.S.S.G. App. A (1998).

(306.) U.S.S.G. [sections] 2H3.1(a)-(b) (1998).

(307.) U.S.S.G. [sections] 2H3.1(c)(1) (1998).

(308.) 18 U.S.C. [subsections] 1341, 1343 (1994).

(309.) 18 U.S.C. [subsections] 1341, 1343 (1994).

(310.) U.S.S.G. [sections] 2F1.1 (1998).

(311.) U.S.S.G. [sections] 2F1.1(a)-(b) (1998).

(312.) U.S.S.G. [sections] 2F1.1(b)(1) (1998); see also United States v. Austin, 54 F.3d 394, 402 (7th Cir. 1995) (upholding sentence based on sales revenue of $3.8 million, even though the art works "were worthless fakes" having no value).

(313.) U.S.S.G. [sections] 2F1.1(b)(2) (1998); see also United States v. Austin, 103 F. 3d 606, 608 (7th Cir. 1997) (affirming upward adjustment in sentencing for more than minimal planning and for organizing or supervising more than five persons); United States v. Ellerbee, 73 F.3d 105, 108 (6th Cir. 1996) (upholding two-level enhancement of sentence based on evidence of "more than minimal planning," which could be deduced by "more planning than is typical, repeated acts, and steps to conceal the crime"); United States v. Mett, 65 F.3d 1531, 1537 (9th Cir. 1995) (sustaining increased sentence).

(314.) 18 U.S.C. [sections] 1963(a) (1994).

(315.) 18 U.S.C. [sections] 1963(a) (1994).

(316.) U.S.S.G. App. A (1998); see United States v. Carrozza, 4 F.3d 70, 74-75 (lst Cir. 1993) (reviewing and applying [sections] 2E1.1 to RICO violation under 18 U.S.C. [sections] 1963). For a complete discussion of sentencing under RICO, see the RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT article in this issue.

(317.) Pub. L. No. 104-153, [sections] 3, 110 Stat. 1136 (1996) (amending 18 U.S.C. [sections] 1961(1)(B)).

(318.) 18 U.S.C. [sections] 2320(a) (1994).

(319.) See 18 U.S.C. [sections] 2320(a) (1994) (requiring higher penalties for repeat offenders).

(320.) 18 U.S.C. [sections] 2320(b) (1994); see also Vuitton v. White, 945 F.2d 569, 575-76 (3d Cir. 1991) (discussing requirements for relief under the ex parte seizure provision of the Act)

(321.) 18 U.S.C. [sections] 2318(a) (Supp. 1997). In 1996, the statute was amended to include "computer program(s)." Pub. L. No. 104-153, [sections] 4(a)-(b), 110 Stat. 1386 (1996).

(322.) U.S.S.G. App. A (1998).

(323.) U.S.S.G. [sections] 2B5.3(a) (1998).

(324.) U.S.S.G. [sections] 2B5.3(b)(1) (1998). However, the reference in [sections] 2B5.1 to the table contained in [sections] 2F1.1 applies only to the actual table, not to the entire offense guideline, which means that enhancements contained in [sections] 2F1.1 are not applicable to defendants convicted of violating [sections] 2319 or [sections] 2320. "An instruction to use a particular subsection or table from another offense guideline refers only to the particular subsection or table referenced, and not to the entire offense guideline." U.S.S.G. [sections] 1B1.5(b)(2) (1998). But cf. Miner, infra note 325, at 307 (criticizing the U.S.S.G. penalties for copyright felonies as "much too low").

(325.) 18 U.S.C. [sections] 2319(b)(1) (1994). The Copyright Felony Act does not require that all affected copyrights be of the same class or held by the same copyright owner. Saunders, supra note 116, at 690. The ten copies or phonorecords can be an aggregation of works by different authors, allowing for the establishment of a case of criminal copyright infringement against an infringer who has adversely affected several different copyright holders. Id. As stated in United States v. Larracuente, 952 F.2d 672 (2d Cir. 1992), the definition of "retail value" in cases involving copies of good quality is "the suggested retail price of the legitimate copyrighted work when it was released and not the value of the infringing copies." Accord United States v. Cho, 136 F.3d 982 (5th Cir. 1998); United States v. Ellerbee, 73 F.3d 105, 109 (6th Cir. 1996); United States v. Hicks, 46 F.3d. 1128 (4th Cir. 1995). See generally Roger J. Miner, Considering Copyright Crimes, 42 J. COPYRIGHT SOC'Y U.S.A. 303, 310 (1995).

(326.) Saunders, supra note 116, at 690

(327.) 18 U.S.C. [sections] 3571(b)-(c) (1994).

(328.) 18 U.S.C. [sections] 3571 (d) (1994). For an example of the application of the Sentencing Guidelines to copyright felonies, see Larracuente, 952 F.2d at 674-75. 329. 18 U.S.C. [sections] 2319(b)(2) (1994).

(330.) 18 U.S.C. [subsections] 2319(b)(3), 3571(b)(5) (1994).

(331.) 17 U.S.C. [sections] 506(b) (1994); see also United States v. One Sharp Photocopier, 771 F. Supp. 980, 984 (D. Minn. 1991) (finding government is entitled to forfeiture of a copier used to illegally duplicate software operations manual accompanying copyrighted computer software).

(332.) 18 U.S.C. [sections] 2319A(a) (1994).

(333.) 18 U.S.C. [sections] 2319A(a) (1994).

(334.) 18 U.S.C. [sections] 2319A(b)-(c) (1994).

(335.) 35 U.S.C. [sections] 292(a) (1994); see Accent Designs, Inc. v. Jan Jewelry Designs, Inc., 827 F. Supp. 957, 968-70 (S.D.N.Y. 1993) (applying [sections] 292(a)'s fining mechanism).

(336.) See Krieger v. Colby, 106 F. Supp. 124, 131 (S.D. Cal. 1952) (imposing eight separate fines on defendants who received shipments of goods whose labels violated the predecessor to [sections] 292). But see Sadler-Cisar, Inc. v. Commercial Sales Network, Inc., 786 F. Supp. 1287, 1296 (N.D. Ohio 1991) (holding that "continuous markings over a given time constitute a single offense" under [sections] 292(a)).

(337.) 35 U.S.C. [sections] 292(b) (1994); see also Mainland Indus., Inc. v. Standal's Patents, Ltd., 229 U.S.P.Q. (BNA) 43, 46 (D. Or. 1985) (holding that half the fines are payable to the United States), aff'd, 799 F.2d 746 (Fed. Cir. 1986).

(338.) 18 U.S.C. [sections] 497 (1994).

(339.) 18 U.S.C. [sections] 497 0994).

(340.) 18 U.S.C. [sections] 3571(b) (1994) (outlining fines for individuals); 18 U.S.C. [sections] 3571(c) (1994) (setting forth fines for organizations); 18 U.S.C. [sections] 3571(d) (1994) (stating that fine equals twice gross gain or loss when violators have pecuniary gain or if victim suffer loss).

(341.) U.S.S.G. App. A(1998).
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Title Annotation:Fourteenth Survey of White Collar Crime
Author:Gidseg, Randy; Santorelli, Bridget; Walsh, Elizabeth; Wells, Greg
Publication:American Criminal Law Review
Geographic Code:1USA
Date:Jun 22, 1999
Words:25053
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