BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 550| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 445-6614 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 550 Author: Padilla (D), et al. Amended: 5/10/11 Vote: 21 SENATE BUSINESS, PROF. & ECON. DEV. COMMITTEE : 8-0, 4/11/11 AYES: Price, Emmerson, Corbett, Correa, Hernandez, Negrete McLeod, Vargas, Wyland NO VOTE RECORDED: Walters SENATE PUBLIC SAFETY COMMITTEE : 5-2, 5/3/11 AYES: Hancock, Harman, Liu, Price, Steinberg NOES: Anderson, Calderon SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 SUBJECT : Business: manufactured optical disc SOURCE : Recording Industry Association of America DIGEST : This bill 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, and increases fines applicable to a person who violates the provisions regulating manufactured optical CONTINUED SB 550 Page 2 discs. ANALYSIS : 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. 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. 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 jail term of up to one year or a fine up to $10,000, or by both fine and imprisonment. 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. 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. 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. CONTINUED SB 550 Page 3 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 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 CONTINUED SB 550 Page 4 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, and requires an inspection be conducted by officers whose primary responsibilities include investigation of high-technology or intellectual property piracy. 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 information necessary to verify CONTINUED SB 550 Page 5 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 CONTINUED SB 550 Page 6 identification mark or unique identifying code. Background 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. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes SUPPORT : (Verified 5/23/11) Recording Industry Association of America (Sponsor) City of Los Angeles Hollywood Chamber of Commerce Los Angeles Area Chamber of Commerce Sony Music Entertainment Valley Industry and Commerce Association ARGUMENTS IN SUPPORT : According to this bill's sponsor, the Recording Industry Association of America (RIAA), California has a serious problem with the crime of music CONTINUED SB 550 Page 7 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. JJA:kc 5/23/11 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED