BILL ANALYSIS Ó
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|Hearing Date:April 11, 2011 |Bill No:SB |
| |550 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Curren D. Price, Jr., Chair
Bill No: SB 550Author:Padilla
As Introduced: February 17, 2011 Fiscal:Yes
SUBJECT: Business: manufactured optical disc.
SUMMARY: Allows law enforcement officials to inspect commercial
optical disc (CD or DVD) manufacturing facilities to ensure compliance
with existing laws that require certain identifying marks on each
disc. Prohibits the possession of optical disc manufacturing
equipment that has not been adapted to apply the required identifying
marks. Requires optical disc manufacturers to keep certain records.
Increases fines applicable to a person who violates the provisions
regulating manufactured optical discs.
Existing law:
1)Requires a person who manufactures optical discs (including but not
limited to CDs or DVDs) for commercial purposes to permanently mark
each disc with either the name of the manufacturer and the state
where the disc was manufactured, or a unique identification code,
(referred to in the industry as a "Source Identification Code" or
"SID Code") that is visible without magnification or a special
device. (Division 8, Chapter 11.5, Section 21800 of the Business
and Professions Code (BPC))
2)Makes a person who manufactures optical disks without these required
marks guilty of a misdemeanor punishable by a fine between $500 and
$5000 for a first offense, and up to $50,000 for a second or
subsequent offense. (BPC§ 21804)
3)Makes a person who buys, sells, or rents an optical disc knowing
that the required identification mark is missing or has been
removed, defaced, destroyed guilty of a misdemeanor, punishable by a
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jail term of up to one year or a fine up to $10,000, or by both fine
and imprisonment. (BPC § 21805)
4)Makes a person who knowingly removes, covers, or alters the
identification mark guilty of a misdemeanor punishable by a jail
term of up to one year and a maximum fine of $10,000. (BPC § 21806)
5)Specifies that a person "manufactures an optical disc for commercial
purposes" if that person manufactures at least 10 of the same or
different optical discs in a 180-day period for purposes of resale.
(BPC § 21802)
This bill:
1)Prohibits anyone who manufactures optical discs for commercial
purposes from owning or operating an optical disc mold unless it is
equipped to apply the required identification mark.
2)Defines, for the purposes of the chapter:
a) "Commercial purposes" as the manufacture of at least 10 of the
same or different optical discs in a 180-day period by storing
information on the disc for the purposes of resale by that person
or others.
b) "Manufacturer" as a person who replicates the physical optical
disc or produces the master used in any optical disc replication
process. It does not include a person who manufactures optical
discs for internal use, testing, or review, or a person who
manufactures blank optical discs.
c) "Manufacturing Equipment" as any machine, equipment, or
device, including mastering equipment, used for the manufacture
of optical discs or production parts in accordance with this
chapter.
d) "Mastering Equipment" as any machine, equipment, or device
used for the mastering of optical discs or production parts
consisting of a signal processor and laser beam recorder or any
other recorder, used to record data onto the glass or polymer
master disc from which production parts are produced, or to
record data directly onto a production part.
e) "Optical Disc" as a disc capable of being read by a laser or
other light source on which data is stored in digital form. It
includes, but is not limited to, discs known as CDs, DVDs, or
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related mastering source materials. It does not include blank
optical discs.
f) "Production Part" as the item usually referred to as a stamper
that embodies data in a digital form and is capable of being used
to mold optical discs, and includes any other item, usually
referred to as a master, father or mother, embodying data from
which a stamper may be produced by means of an electroplating
process.
g) "Professional organization" as an organization whose
membership consists wholly or substantially of intellectual
property rights owners, and which is mandated by those members to
enforce their rights against counterfeiting and piracy.
3)Increases the fine for failing to properly mark an optical disc
manufactured for commercial purposes to a range of $2500 - $25,000
for a first offense and a maximum of $250,000 for a subsequent
offense.
4)Increases the fine for knowingly buying, selling, or renting a disc
without the proper mark to a range of $1,000 - $10,000.
5)Increases the fine for knowingly removing, covering, or altering the
required mark to a range of $1,000 - $10,000.
6)Requires that a person who manufactures optical discs for commercial
purposes keep full and accurate records and inventory of its
manufacturing equipment and make these records available to law
enforcement for inspections.
7)Requires that a person who manufactures optical discs keep each of a
following for at least five years from the date of production:
a) A sample of each optical disc title manufactured.
b) A retrievable copy of the content of each master
c) The name and physical address of the customer who originated
the order.
8)Allows law enforcement officers to perform inspections at commercial
optical disc manufacturing facilities to ensure compliance.
9)Specifies that a search of a manufacturing facility by law
enforcement must take place during regular business hours and be
limited to inspection of physical items and collection of
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information necessary to verify compliance.
10)Provides that officers may perform inspections without giving prior
notice or obtaining a warrant.
11)Authorizes law enforcement officials to do all of the following
when performing an inspection:
a) Take an inventory of all manufacturing equipment, including
the identification mark or code that any piece of equipment has
been modified to apply.
b) Review any optical disc or equipment involved in manufacturing
the disk.
c) Review any physical or digital records or documents relating
to the business concerned.
d) Inspect, remove, or detain specified equipment, records, or
documents for purposes of examination for as long as reasonably
necessary.
e) Seize any optical disc or production part in violation of this
chapter.
f) Obtain and remove up to four samples each of the optical discs
molded by each mold that has been used or could be used to
manufacture optical discs.
12)Prohibits any person from evading, obstructing, or refusing any
inspection requested or being carried out by a law enforcement
officer to determine compliance with this chapter.
13)Requires that the manufacturer and the manufacturer's employees or
agents:
a) Provide and explain any record book required to be maintained
pursuant to this act
b) Point out and provide access to all optical discs,
manufacturing equipment, etc. and demonstrating to the
satisfaction of the officer that they include or have been
adapted to apply the required identification mark or unique
identifying code.
FISCAL EFFECT: Unknown. Legislative Counsel has keyed this bill
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"fiscal."
COMMENTS:
1. Purpose. This bill is sponsored by the Recording Industry
Association of America (RIAA) . According to the Author, "this bill
will help address piracy in the music industry, as well as motion
picture industry, by placing enforcement and penalty actions around
those using commercial replicators to illegally produce copies of
intellectual property Ýsuch as] music, movies and software, for
sale on the streets." Economic Impact of Pirated Discs. The film,
music, and software industries are vital to California's economy.
Since the rise of digital technology, piracy of DVDs, music CDs,
and software discs has cost these industries, and the California
economy, billions of dollars. Although exact figures regarding the
cost of piracy to the economy are difficult to calculate, a 2007
study by the Institute for Policy Innovation, a libertarian-leaning
think tank based in Texas, estimated that the sale of bootlegged
discs across the globe costs the U.S. recording and film industries
an estimated $1.6 billion per year.
The RIAA claims that the problem of optical disc pirating has grown
in recent years due to the increasing number of high-quality,
mass-produced CDs and DVDs on the market. These discs are being
produced using professional-grade equipment that does not comply
with California's requirement that the discs be properly marked.
The RIAA also claims that there has been a rise in the sale of
discs filled with compressed music files, with hundreds of pirated
songs on every disc. The RIAA claims that even some legitimate
disc manufacturers have been "duped" into producing discs with
pirated material. It is unclear how many of the pirated discs are
manufactured in California.
Law enforcement officials are, however, cracking down on the
manufacture and sale of pirated discs. In the last two months
alone, law enforcement officials have made arrests in three major
disc piracy rings involving California:
On April 3, 2011 a Sacramento man pleaded guilty to
federal charges of having bootlegged more than 87,000 American
movies and songs worth a retail value of more than $1.3
million. The pirated discs were allegedly sold and rented at
four video retail and rental stores in the Sacramento region.
On March 23 in Oceanside, California, police arrested 7
people and seized more than 3,400 allegedly bootlegged items
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that were being sold at a swap meet.
On February 14, 2011, Utah officials announced that they
had busted a disc piracy operation that involved 21,000
pirated CDs and 8,100 DVDs valued at $346,000 that were sent
from California to Utah and distributed out of Mexican food
markets and then sold by individuals at flea markets, swap
meets and on the street.
This bill is intended to allow for stronger enforcement of
California's existing requirements that disc manufacturers properly
mark their discs to help law enforcement officials track down the
source of these illegally manufactured discs that contain pirated,
copyrighted material.
1. History of Disc Piracy Protection in California. The passage of AB
2633 (Murray, Chapter 712, Statutes of 1998) made California the
first state to require optical disc manufacturers to permanently
mark their discs with identifying information. The effort was
intended to prevent the loss of revenue due to pirated material by
curtailing illegal activity associated with the production,
distribution, sale and possession of counterfeit optical disks. AB
2633 required disk manufacturers to permanently mark each disc with
the name of the manufacturer and the state that the disc was
manufactured in.
Supporters of the bill included software, motion picture, video,
and recording industry associations who collectively argued that
the billions of dollars lost by their companies justified the
approach taken in the bill. They noted that the ability to copy
the digital information on optical discs without any degradation in
quality made optical discs different from other technologies often
pirated. The supporters asserted that the bill would increase the
ability of industries using optical disc technology to identify
those individuals who counterfeit copyrighted information, and that
California's dominance in these industries necessitated early state
action.
2. Source Identification Code (SID Code). Two years later, SB 1384
(Business and Professions Committee, Chapter 120, Statutes of 2000)
was passed in order to give disc manufacturers "more flexibility in
meeting the labeling requirements of AB 2633." SB 1384 allowed
manufactured discs to be marked with a "Source Identification
Code," or "SID Code," an industry-wide standard code employed by CD
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and DVD manufacturing plants to identify all discs mastered and/or
replicated in a particular plant. Each participating CD-, DVD-
manufacturing facility around the world has their own unique code
and this enables the entertainment industries to trace the origin
of optical discs. According to the International Federation of the
Phonographic Industry (IFPA), the SID Code has now been implemented
in over 80% of the world's optical disc plants, representing over
90% of worldwide optical disc manufacturing capacity. The SID Code
can be used to identify all discs mastered and/or replicated in its
plant as well as the individual Laser Beam Recorder ("LBR") signal
processor or mold that produced a particular stamper or disc.
The prevalence of marking discs with an SID code helps law
enforcement officials track the source of any illegally produced
discs produced on equipment that uses the SID Code. This bill
gives law enforcement officials tools to more effectively enforce
manufacturer compliance with the disc-marking requirement, and may
lead to more effective prevention of the piracy that is hurting
California's economy.
3. Arguments in Support. According to the sponsor of the bill, the
Recording Industry Association of America (RIAA) , California has a
serious problem with the crime of music piracy. RIAA claims that
street vendors and retail locations offer illicit sound recordings
openly throughout the state, many of which are supplied by large
scale manufacturing and distribution operations. The group
believes that music piracy is a devastating economic crime that
deprives artists and record labels of hard earned profits,
resulting in losses of jobs in California and across the nation.
Further, legitimate music retailers throughout the state are forced
to compete with music pirates that undercut their businesses by
failing to pay for music, and failing to pay local, state, and
federal taxes.
RIAA believes that current law needs to be updated in recognition
of the evolution of the problem faced and new provisions are
"absolutely necessary to further the disc identification
regulations imposed by existing law," and to advance the state's
interest in creating a level playing field for law-abiding optical
disc manufacturers and protecting the vibrant entertainment
industry of this state.
NOTE : Double-referral to Public Safety Committee (second).
SUPPORT AND OPPOSITION:
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Support:
Recording Industry Association of America (Sponsor)
Opposition:
None on file as of April 5, 2011
Consultant:Sarah Mason/Chris Belsky