BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 819| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 819 Author: Charles Calderon (D), et al Amended: 8/3/10 in Senate Vote: 27 - Urgency SENATE PUBLIC SAFETY COMMITTEE : 7-0, 6/29/10 AYES: Leno, Cogdill, Cedillo, Hancock, Huff, Steinberg, Wright SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 ASSEMBLY FLOOR : 77-0, 6/2/09 - See last page for vote SUBJECT : Intellectual property piracy SOURCE : Author DIGEST : This bill doubles the fines in existing law for violations related to piracy or counterfeiting of specified marks registered with the Secretary of State or registered on the Principal Register of the United States Patent and Trademark Office. ANALYSIS : Existing law makes it a crime for a person to willfully manufacture, intentionally sell, or knowingly possess for sale any counterfeit mark registered with the Secretary of State or registered on the Principal Register of the United States Patent and Trademark Office. Existing law imposes specified imprisonment and fines based upon the number of counterfeit marks involved in the offense and if CONTINUED AB 819 Page 2 the person is an individual or a business entity. Existing law also specifies certain imprisonment and fines for a subsequent conviction of this offense and provides other specified penalties if the conduct that was the basis of the conviction has directly and foreseeably caused death or great bodily injury to another through reliance on the counterfeited item for its intended purpose. Existing law makes it a crime for a person to knowingly and willfully transfer or cause to be transferred any sounds that have been recorded on a phonograph record, disc, wire, tape, film, or other article on which sounds are recorded, with intent to sell or cause to be sold, or to use or cause to be used for commercial advantage or private financial gain through public performance, the article on which the sounds are so transferred, without the consent of the owner. Existing law specifies certain penalties for a violation of these provisions, and certain other provisions regarding the transportation of an article with the knowledge that the sounds thereon have been so transferred without the consent of the owner, if the offense involves the transfer or transportation, or conduct causing that transfer or transportation, of not less than 1,000 of the articles. Existing law also specifies certain other penalties for any other violation of these provisions and for a second or subsequent conviction. Existing law makes it a crime for any person to transport or cause to be transported for monetary or other consideration within the state, any article containing sounds of a live performance with the knowledge that the sounds thereon have been recorded or mastered without the consent of the owner of the sounds of the live performance. Existing law specifies certain penalties for a violation of these provisions if the offense involves transporting or causing to be transported not less than 1,000 articles. Existing law also specifies certain other penalties for any other violation of these provisions and for a second or subsequent conviction. Existing law makes it a crime for any person to record or master or cause to be recorded or mastered on any article, with the intent to sell for commercial advantage or private financial gain, the sounds of a live performance with the CONTINUED AB 819 Page 3 knowledge that the sounds thereon have been recorded or mastered without the consent of the owner of the sounds of the live performance. Existing law specifies certain penalties for a violation of these provisions if the offense involves the recording, mastering, or causing the recording or mastering of at least 1,000 articles. Existing law also specifies certain other penalties for any other violation of these provisions and for a second or subsequent conviction. Existing law provides that a person is guilty of failure to disclose the origin of a recording or audiovisual work if, for commercial advantage or private financial gain, he/she knowingly advertises, sells, rents, manufactures, or possesses for those purposes, a recording or audiovisual work that does not disclose the name of the manufacturer, author, artist, performer, or producer, as specified. Failure to disclose the origin of a recording or audiovisual work is punishable by imprisonment in a county jail, imprisonment in the state prison, or a fine, or by both imprisonment and a fine, as specified, depending on the number of articles of audio recordings or audiovisual works involved, and whether the offense is a first offense, or second or subsequent offense. Existing law provides that every person who operates a recording device in a motion picture theater while a motion picture is being exhibited, for the purpose of recording a theatrical motion picture and without the express written authority of the owner of the motion picture theater, is guilty of a public offense and shall be punished by imprisonment in a county jail not exceeding one year, by a fine not exceeding $2,500, or by both that fine and imprisonment. This bill doubles the fines that may be imposed for a violation of any of the above provisions. Statutory law that became inoperative on January 1, 2010, provided that it was a crime, punishable by a fine not exceeding $2,500, imprisonment in a county jail for a period not exceeding one year, or by both that fine and imprisonment for a person located in California who knew that a particular recording or audiovisual work was CONTINUED AB 819 Page 4 commercial, to knowingly electronically disseminate all or substantially all of that commercial recording or audiovisual work to more than 10 other people without disclosing his/her e-mail address, and the title of the recording or audiovisual work. That statutory law also provided that a minor who violated these provisions was punishable by a fine not exceeding $250 for a first or second offense and by a fine not exceeding $1,000, imprisonment in a county jail, or by both that fine and imprisonment for a third or subsequent violation. This bill again makes operative those provisions and would double the fines that may be imposed for a violation of those provisions. By creating a new crime, this bill imposes a state-mandated local program. Existing law provides that, in addition to any other penalty or fine, a court shall order any person who has been convicted of any violation of certain provisions of law relating to the transfer or transportation of misappropriated recorded music, the transportation of an article containing unauthorized recordation of sounds of live performances, the unauthorized recording of sounds of live performances, or the failure to disclose the origin of a recording or audiovisual work to make restitution to the owner or lawful producer, or trade association acting on behalf of the owner or lawful producer, of the phonograph record, disc, wire, tape, film, or other device or article from which the sound or visual images were derived that suffered economic loss resulting from the violation. Existing law provides how value is to be determined for the purpose of calculating restitution. This bill also requires a court to order restitution when the person has been convicted of violating certain other provisions of law relating to the manufacture or sale of a counterfeit registered mark and the electronic transmission of all or substantially all of a commercial recording or audiovisual work. This bill states the following: 1. According to a 2007 study by the Institute for Policy CONTINUED AB 819 Page 5 Innovation, intellectual property piracy, meaning the theft of movies, music, software, and video games, costs the United States economy $58,000,000,000 each year. 2. The problem of intellectual property piracy continues to grow worse. A 2005 Gallup study found that five percent of Americans had purchased, copied, or downloaded counterfeit music in the preceding year. By 2007, this number had jumped to nine percent. The percentage of respondents that admitted buying a pirated movie rose from three percent in 2005, to six percent in 2007. At the same time, once robust DVD sales have flattened over the past few years, while CD shipments to retailers have plummeted. 3. 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 $802,000,000 in wages and salaries, over $1,000,000,000 in retail sales of business software applications, and roughly $239,000,000 in total tax losses. 4. Intellectual property piracy poses a significant threat to consumers, who, through no fault of their own, are often deceived or deliberately misled, or both deceived and deliberately misled, as to the nature of purchased products, whereby pirated goods are palmed off, including in electronic form, as legitimate authorized goods. 5. A growing number of criminal organizations worldwide are involved in intellectual property piracy. 6. This act will send a strong signal that California is committed to protecting the intellectual property created by California's innovation and entertainment industries. 7. Finally, by safeguarding the legitimate sale of intellectual property, California will increase its tax CONTINUED AB 819 Page 6 base, and stimulate the economy. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes SUPPORT : (Verified 8/5/10) California District Attorneys Association Motion Picture Association of America ARGUMENTS IN SUPPORT : 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 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 L.A. 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; and 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 LA cost nearly $134 million in state income taxes; $63.5 million in sales taxes; $2 million in LA City Business Taxes. "This is not just an LA problem. Digital piracy reaches across the state, affecting the Silicon Valley and its CONTINUED AB 819 Page 7 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." ASSEMBLY FLOOR : AYES: Adams, Ammiano, Anderson, Arambula, Beall, Blakeslee, Blumenfield, Brownley, Buchanan, Caballero, Charles Calderon, Carter, Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon, DeVore, Duvall, Emmerson, Eng, Evans, Feuer, Fletcher, Fong, Fuentes, Fuller, Furutani, Gaines, Galgiani, Garrick, Gilmore, Hagman, Hall, Harkey, Hayashi, Hernandez, Hill, Huber, Huffman, Jeffries, Jones, Knight, Krekorian, Lieu, Logue, Bonnie Lowenthal, Ma, Mendoza, Miller, Monning, Nava, Nestande, Niello, Nielsen, John A. Perez, V. Manuel Perez, Portantino, Price, Ruskin, Salas, Saldana, Silva, Skinner, Smyth, Solorio, Audra Strickland, Swanson, Torlakson, Torres, Torrico, Tran, Villines, Yamada, Bass NO VOTE RECORDED: Bill Berryhill, Tom Berryhill, Block RJG:mw 8/5/10 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED