BILL ANALYSIS                                                                                                                                                                                                    



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          ASSEMBLY THIRD READING
          AB 819 (Charles Calderon)
          As Amended  June 1, 2009
          2/3 vote. Urgency 

           PUBLIC SAFETY       7-0         APPROPRIATIONS      12-5        
           
           ------------------------------------------------------------------ 
          |Ayes:|Solorio, Hagman,          |Ayes:|De Leon, Ammiano, Charles  |
          |     |Furutani, Gilmore, Hill,  |     |Calderon, Davis, Fuentes,  |
          |     |Ma, Skinner               |     |Hall, John A. Perez,       |
          |     |                          |     |Price, Skinner, Solorio,   |
          |     |                          |     |Torlakson, Krekorian       |
          |     |                          |     |                           |
          |-----+--------------------------+-----+---------------------------|
          |     |                          |Nays:|Nielsen, Duvall, Harkey,   |
          |     |                          |     |Miller,                    |
          |     |                          |     |Audra Strickland           |
           ------------------------------------------------------------------ 

           SUMMARY  :   Creates the Intellectual Property Piracy Prevention  
          and Prosecution (IPPPP) Program to fund grants for local law  
          enforcement and district attorneys for the purposes of  
          preventing and prosecuting intellectual property piracy.   
          Specifically,  this bill  :  

          1)Removes the creation and distribution of counterfeit software  
            and pirated sound recordings from the list of high technology  
            crimes to be under the purview of the High Technology Crime  
            Advisory Committee (HTCAC).

          2)Establishes the IPPPP Act of 2009.

          3)Finds and declares the following:  

             a)   According to a 2007 study by the Institute for Policy  
               Innovation, intellectual property piracy, meaning the theft  
               of movies, music, software, and video games, costs the  
               United States economy $58 billion each year;

             b)   The problem of intellectual property piracy continues to  
               grow worse.  A 2005 Gallup study found that 5% of Americans  
               had purchased, copied, or downloaded counterfeit music in  
               the preceding year.  By 2007, this number had jumped to 9%.  








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                The percentage of respondents that admitted buying a  
               pirated movie rose from 3% in 2005 to 6% in 2007.  At the  
               same time, once robust DVD sales have flattened over the  
               past few years, while CD shipments to retailers have  
               plummeted;

             c)   The effect of intellectual property piracy on California  
               and its citizens is particularly dire. Intellectual  
               property piracy adversely affects the California economy,  
               eliminates jobs, and damages industry.  According to the  
               Business Software Alliance, in 2003, software piracy alone  
               cost the California economy more than 13,000 jobs, over  
               $802 million in wages and salaries, over $1 billion in  
               retail sales of business software applications, and roughly  
               $239 million in total tax losses.  This act will send a  
               strong signal that California is committed to protecting  
               the intellectual property created by California's  
               innovation and entertainment industries;

             d)   By creating a technical advisory committee, California  
               will be able to draw upon the expertise and insight of  
               those on the front lines of the anti-piracy effort;

             e)   Grants awarded pursuant to this act will be used to  
               foster innovation and to provide local law enforcement and  
               prosecutors the tools they need to effectively fight  
               intellectual property piracy; and,  

             f)   Finally, by safeguarding the legitimate sale of  
               intellectual property, California will increase its tax  
               base, and stimulate the economy.

          4)Mandates that funds provided under this program are intended  
            to ensure that law enforcement and prosecutors are equipped  
            with the necessary personnel and equipment to combat  
            successfully intellectual property piracy, which includes  
            piracy of movies, music, software, and video games.

          5)Creates within the Department of Justice (DOJ), a program of  
            financial assistance for law enforcement and district  
            attorneys' offices, designated the IPPPP Program.  Upon  
            appropriation by the Legislature, all funds appropriated to  
            the DOJ for the purposes of this chapter shall be administered  
            and disbursed by the Attorney General (AG) in consultation  








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            with the IPPPP Advisory Committee as established.

          6)Provides that all funds designated for use for purposes of  
            this chapter shall be deposited in the IPPPP Fund, which is  
            hereby established.  The fund shall be under the direction and  
            control of the office of the AG.

          7)Requires the advisory committee to review grant applications  
            and, on a majority vote of the membership, submit those  
            applications to the AG for formal approval.

          8)States that the advisory committee shall monitor and audit the  
            use of grant funds.

          9)Necessitates that grant money must be used exclusively to  
            combat intellectual property piracy within California.  Grants  
            shall be made on an annual basis, and may not be used to pay  
            existing staff, absent extraordinary circumstances and  
            approval by the AG.  Grant recipients may receive funding for  
            no more than three years without submitting another grant  
            application.  Grants shall only be made to applicants with an  
            existing budget dedicated to fighting intellectual property  
            piracy.

          10)Demands that in order to receive a grant, prospective  
            recipients shall agree in writing to the following terms, as  
            conditions of receiving a grant:

             a)   The recipient is authorized to accept grant funds under  
               all applicable state and local laws;

             b)   The recipient will vigilantly safeguard grant funds and  
               ensure that use of the grant funds fully comports with the  
               purposes specified in the application for the grant funds,  
               as approved or modified by the advisory committee;

             c)   Grant funds shall be used to augment, but shall not be  
               used to supplant, a grant recipient's budget;

             d)   If the grant funds are used for the purpose of  
               investigation, litigation, or prosecution, any remedy,  
               settlement, judgment, or restitution award shall provide  
               for full reimbursement to the IPPPP Fund of all grant funds  
               used for that investigation, litigation, or prosecution;








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             e)   The recipient shall notify the advisory committee in  
               writing of litigation or prosecution results, including any  
               settlement, judgment, or other resolution, within 30 days;

             f)   The recipient shall notify the advisory committee in  
               writing of the status of all outstanding investigations,  
               litigation, or prosecutions funded in whole or in part by  
               the grant six months after the funds are disbursed, and  
               every 12 months thereafter until all disbursed funds have  
               been expended and reported on;

             g)   The recipient shall fully cooperate with the advisory  
               committee and its agents in providing all information and  
               documents concerning the use of grant funds;

             h)   Except as otherwise expressly agreed by the advisory  
               committee, within 60 days after the conclusion of the  
               investigation, litigation, or prosecution, training, or  
               other activity for which the disbursement was awarded, the  
               recipient shall return all unused funds to the advisory  
               committee by check made payable to the IPPPP Fund;

             i)   If grant funds are used for the production of any  
               materials, the recipient shall permit the AG's Office and  
               the advisory committee to use and distribute those  
               materials without restriction for their intended purposes;  
               and,

             j)   The advisory committee is authorized to audit, review,  
               and inspect the recipient's activities, books, documents,  
               papers, and records during the project and thereafter for  
               three years following the final allocation of funds.

          11)Establishes the IPPPP Advisory Committee for the purpose of  
            formulating a comprehensive written strategy for addressing  
            intellectual property piracy prevention and prosecution  
            throughout California, and to advise the AG on the appropriate  
            disbursement of funds to local law enforcement agencies and  
            district attorneys' offices.

          12)Requires the IPPPP Advisory Committee to identify various  
            priorities for law enforcement attention regarding the  
            following:








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             a)   The apprehension and prosecution of criminal  
               organizations, networks, and groups of individuals engaged  
               in the theft of, counterfeiting of, or unauthorized  
               distribution, sale, or reproduction of, the following types  
               of intellectual property:

               i)     Movies;

               ii)    Music;

               iii)   Computer software; and,

               iv)    Video games.

             b)   The investigation and prosecution of violations of  
               criminal and civil provisions of law; and,

             c)   The advising of local law enforcement and district  
               attorneys regarding current aspects of intellectual  
               property piracy, in order to respond quickly to the most  
               serious threats of piracy.

          13)Asks the IPPPP Advisory Committee to meet at least four times  
            per year, shall consist of 10 members, of whom six shall be  
            appointed by the Governor, two by the Speaker of the Assembly,  
            and two by the Senate Committee on Rules.  Members shall be  
            paid $100 per diem for each meeting, as well as all necessary  
            travel expenses.  The advisory committee shall be composed of  
            the following members:

             a)   At least two representatives of the general public;

             b)   At least one representative with demonstrable knowledge  
               of the movie industry;

             c)   At least one representative with demonstrable knowledge  
               of the music industry;

             d)   At least one representative with demonstrable knowledge  
               of the computer software industry;

             e)   At least one representative with demonstrable knowledge  
               of the video gaming industry;








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             f)   At least one representative with experience in law  
               enforcement, specifically relating to intellectual property  
               piracy offenses; and,

             g)   At least one representative with experience prosecuting  
               intellectual property piracy offenses at the local, state,  
               or federal level.

          14)Proscribes that in deciding which grant applications to fund,  
            the IPPPP Advisory Committee shall consider the following  
            factors:

             a)   The purpose for which the funds are sought;

             b)   The proposal's specificity, including whether the  
               proposal identifies anticipated costs, along with materials  
               and personnel to be used;

             c)   The anticipated public benefit;

             d)   The ability of the advisory committee to audit the use  
               of the funds; and,

             e)   The number, amount, and use of previous grants awarded  
               to the prospective recipient, if any.

          15)Entitles members of the IPPPP Advisory Committee to the same  
            immunity from liability that is provided to public employees.

          16)Provides that this act shall become operative only if an  
            appropriation is provided for its operation.

          FISCAL EFFECT  :   According to the Assembly Appropriations  
          Committee, no direct state cost as implementation of this act is  
          contingent upon a subsequent appropriation.  Potential cost  
          pressure in the millions of dollars to fund the IPPPP.

           COMMENTS  :   According to the author, "California remains the  
          capital of the motion picture and television industry as well as  
          a center for the recording and software industries.  In terms of  
          economic activity, television and movies generated a total of  
          $42.2 billion, split almost equally between payroll expenditures  
          and payments to vendors.  Approximately 266,000 people were  








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          directly employed in the motion picture and television industry  
          in California, with an average salary of $80,600.  When indirect  
          employment resulting from the industry is factored in, the  
          number of people working in California as a result of television  
          and movies totals over 500,000.

          "Although piracy is a global problem, a recent study by the Los  
          Angeles County Economic Development Corporation (LAEDC) notes  
          that it affects the Los Angeles region disproportionately due to  
          the concentration of the entertainment industry there.  LAEDC  
          estimates that in 2005 losses to the motion picture industry  
          from piracy were $2.7 billion; the sound recording industry $851  
          million; software publishing $355 million.

          "Not only is digital piracy a direct threat to the industry, but  
          its effects are felt by state and local government in the form  
          of lost tax revenues.  

          "According to the same LAEDC study, piracy affecting the  
          entertainment industry just in Los Angeles cost nearly $134  
          million in state income taxes; $63.5 million in sales taxes; $2  
          million in Los Angeles City business taxes.

          "This is not just a Los Angeles problem.

          "Digital piracy reaches across the state, affecting the Silicon  
          Valley and its computer industry.  According to the Business  
          Software Alliance, in 2003, software piracy alone cost the  
          California economy more than 13,000 jobs, $802 million in wages  
          and salaries, over $1 billion in retail sales of business  
          software applications, and roughly $239 million in total tax  
          losses."

          Please see the policy committee for a full discussion of this  
          bill.
           

          Analysis Prepared by  :    Nicole J. Hanson / PUB. S. / (916)  
          319-3744 


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