United States v. Liu - 731 F.3d 982 (9th Cir. 2013)

Rule:

The term "willfully" in 17 U.S.C.S. § 506(a) requires the government to prove that a defendant knew he was acting illegally rather than simply that he knew he was making copies. As a general matter, when used in the criminal context, a "willful" act is one undertaken with a bad purpose. In other words, in order to establish a "willful" violation of a statute, the Government must prove that the defendant acted with knowledge that his conduct was unlawful. Trafficking in counterfeit labels requires proof that the defendant acted "knowingly." 18 U.S.C.S. § 2318(a)(1). Like "willfully," the word "knowingly" is susceptible to more than one meaning in this context. It could mean either that the defendant knew that he was trafficking or that he knew that the labels were counterfeit. "Knowingly" in the context of trafficking in counterfeit labels means the latter, and thus the government must prove that the defendant knew the labels were counterfeit.

Facts:

Commercial CD and DVD replication differs from the process of recording content onto CDs and DVDs in that pre-recorded discs have their content stamped onto them—requiring a molding machine and a stamper—rather than burned. Defendant Liu has worked in the replication industry since early 1900s and 10 years later, he became the CEO of a DVD manufacturing company he founded. The government became suspicious of his company’s operations thus, a raid was conducted where agents recovered counterfeit copies of a software and related documentation. Followed by a search warrant, where thousands of CDs and DVDs were recovered. Defendant had no authorization from the copyright holders to replicate any of these works but he denied any knowledge of or involvement in replicating other works. Plaintiff government charged defendant with three counts of criminal copyright infringement under 17 U.S.C. § 506(a)(1)(A) and 18 U.S.C. § 2319(b)(1). A fourth count alleged that Liu trafficked in the counterfeit labels on the software, 18 U.S.C. § 2318(a). After trial, defendant was convicted on all counts. Defendant appealed his conviction. 

Issue:

Was the defendant guilty of the alleged copyright infringement and trafficking in counterfeit labels?

Answer:

No. The judgment vacated and the case was remanded.

Conclusion:

The court held that the defendant's convictions for copyright infringement under 17 U.S.C.S. § 506(a)(1)(A) and 18 U.S.C.S. § 2319(b)(1) and trafficking in counterfeit labels under 18 U.S.C.S. § 2318(a) were vacated because the district court failed to properly instruct the jury that the term willfully in § 506(a) required the government to prove that defendant knew he was acting illegally rather than simply that he knew he was making copies and that to knowingly traffic in counterfeit labels under § 2318(a)(1) required knowledge that the labels were counterfeit, and the errors were not harmless. Moreover, the court ruled that one of the copyright infringement counts should be dismissed on remand because counsel was ineffective by failing to raise an obvious statute-of-limitations defense under 17 U.S.C.S. § 507(a), and defendant was prejudiced by the error.