BILL ANALYSIS AB 819 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 819 (Charles Calderon) As Amended August 12, 2010 2/3 vote. Urgency ----------------------------------------------------------------- |ASSEMBLY: |77-0 |(June 2, 2009) |SENATE: |34-0 |(August 18, | | | | | | |2010) | ----------------------------------------------------------------- Original Committee Reference: PUB. S. SUMMARY : Doubles the current fines for crimes relating to intellectual property piracy. The Senate amendments : 1)Find and declare 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%. 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 decreased 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; d) Intellectual property piracy poses a significant threat AB 819 Page 2 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; e) A growing number of criminal organizations worldwide are involved in intellectual property piracy; f) This act will send a strong signal that California is committed to protecting the intellectual property created by California's innovation and entertainment industries; and, g) Finally, by safeguarding the legitimate sale of intellectual property, California will increase its tax base, and stimulate the economy. 2)Change the fine for persons who 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, as follows: a) When the offense involves less than 1,000 of the articles described in this subdivision, with a total retail or fair market value less than that required for grand theft as defined in Penal Code Section 487, and if the person is an individual, he or she shall be punished by a fine of not more than $10,000 instead of $5,000, or by imprisonment in a county jail for not more than one year, or by both that fine and imprisonment; or, if the person is a business entity, by a fine of not more than $200,000 instead of 100,000; b) When the offense involves 1,000 or more of the articles described in this subdivision, or has a total retail or fair market value equal to or greater than that required for grand theft as defined in Penal Code Section 487, and if the person is an individual, he or she shall be punished by imprisonment in a county jail not to exceed one year, or in the state prison for 16 months, or two or three years, or by a fine not to exceed $500,000 instead of $250, 000 or by both that imprisonment and fine; or, if the person is a business entity, by a fine not to exceed $1 million instead AB 819 Page 3 of $500,000; c) Upon a subsequent conviction, if the person is an individual, he or she shall be punished by a fine of not more than $100,000 instead of $50,000 or by imprisonment in a county jail for not more than one year, or in the state prison for 16 months, or two or three years, or by both that fine and imprisonment; or, if the person is a business entity, by a fine of not more than $400,000 instead of $200,000; and, d) Any person who has been convicted of a violation of Item 2) a) above and who, by virtue of 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 shall, if the person is an individual, be punished by a fine of not more than $100,000 instead of $50,000 or by imprisonment in the state prison for two, three, or four years, or by both that fine and imprisonment; or, if the person is a business entity, by a fine of not more than $400,000 instead of $200,000. 1)Increase the fine for those who 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 from $250,000 to $500,000 if the offense involved the transfer or transportation, or conduct causing that transfer or transportation, of not less than 1,000 of the articles. A person who has transported less than 1,000 articles will have the find increased from $25,000 to $50,000. A second or subsequent conviction shall receive an increased find from $100,000 to $200,000. 2)Increase the fine for every person who offers for sale or resale, or sells or resells, or causes the sale or resale, or rents, or possesses for these purposes, any sounds that have been recorded on a phonograph record, disc, wire, tape, film or other article with knowledge that the sounds thereon have been so transferred without the consent of the owner from AB 819 Page 4 $10,000 to $20,000 if the offense involved not less than 100 articles. A second or subsequent conviction shall receive an increased fine from $25,000 to $50,000. 3)Increase the fine for every person who offers for sale or resale, or sells or resells, or causes the sale or resale, or rents, or possesses for these purposes, any sounds that have been recorded on a phonograph record, disc, wire, tape, film or other article with knowledge that the sounds thereon have been so transferred without the consent of the owner from $5,000 to $10,000 if the offense involved less than 100 articles. A second conviction shall receive an increased fine from $10,000 to $20,000. A third or subsequent conviction for the conduct described in this paragraph shall receive an increased fine from $25,000 to $50,000. 4)Increase the fine for any person who transports or causes to be transported for monetary or other consideration within this 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 from $250,000 to $500,000 if the offense involved the transportation or causing to be transported of not less than 1,000 articles. 5)Increase the fine for any person who transports or causes to be transported for monetary or other consideration within this state, more than 100 articles 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 from $25,000 to $50,000 if the offense involved the transportation or causing to be transported of less than 1,000 articles. A second or subsequent conviction shall receive an increased fine of $200,000 instead of $100,000. 6)Increase the fine for any person who offers for sale or resale, or sells or resells, or causes the sale or resale, or rents, or possesses for these purposes, more than 100 articles containing sounds of a live performance with knowledge that the sounds thereon have been so recorded or mastered without the consent of the owner of the sounds of a live performance from $10,000 to $20,000. A second conviction for this offense shall receive an increased fine from $25,000 to $50,000. AB 819 Page 5 7)Increase the fine for any person who, offers for sale or resale, or sells or resells, or causes the sale or resale, or rents, or possesses for these purposes, less than 100 articles 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 from $5,000 to $10,000 if the offense involved the transportation or causing to be transported of less than 1,000 articles. A second or subsequent conviction shall receive an increased fine of $20,000 instead of $10,000. A third conviction shall receive an increased fine of $50,000 from $25,000. 8)Increase the fine for any person who records or masters or causes 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 knowledge that the sounds thereon have been recorded or mastered without the consent of the owner of the sounds of the live performance from $250,000 to $500,000 if the offense involves the recording, mastering, or causing to be recorded or mastered at least 1,000 articles. 9)Increase the fine for any person who records or masters or causes 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 knowledge that the sounds thereon have been recorded or mastered without the consent of the owner of the sounds of the live performance from $25,000 to $50,000 if the offense involves the recording, mastering, or causing to be recorded or mastered at less than 1,000 articles. The fine for a second or subsequent conviction shall be increased from $100,000 to $200,000. 10)Increase the fine for any person who is guilty of failing to disclose the origin of a recording or audiovisual work if, for commercial advantage or private financial gain, he or she knowingly advertises or offers for sale or resale, or sells or resells, or causes the rental, sale or resale, or rents, or manufactures, or possesses for these purposes, any recording or audiovisual work, the cover, box, jacket, or label of which does not clearly and conspicuously disclose the actual true name and address of the manufacturer thereof and the name of the actual author, artist, performer, producer, programmer, or group thereon from $250,000 to $500,000 if the offense AB 819 Page 6 involves the advertisement, offer for sale or resale, sale, rental, manufacture, or possession for these purposes, of at least 100 articles of audio recordings or 100 articles of audiovisual works. If the offense involves less than 100 articles of audio recordings, the fine shall be increased from $25,000 to $50,000. A second or subsequent conviction shall see a fine increase from $100,000 to $200,000. 11)Increase the fine 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 from $2,500 to $5,000. 12)Increase the fine for any person, except a minor, who is located in California, who, knowing that a particular recording or audiovisual work is commercial, knowingly electronically disseminates all or substantially all of that commercial recording or audiovisual work to more than 10 other people without disclosing his or her e-mail address, and the title of the recording or audiovisual work from $2,500 to $5,000. Any minor who violates the aforementioned shall see a fine increased from $500 to $1,000. A third or subsequent conviction of a minor shall receive an increased fine from $1,000 to $2,000. 13)Make this bill a contingent enactment. AS PASSED BY THE ASSEMBLY, this bill created the Intellectual Property Piracy Prevention and Prosecution Program to fund grants for local law enforcement and district attorneys for the purposes of preventing and prosecuting intellectual property piracy. FISCAL EFFECT : According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs. 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 directly employed in the motion picture and television industry in California, with an average salary of $80,600. When indirect AB 819 Page 7 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 FN: 0006109