BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 1479| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 1479 Author: Pavley (D) Amended: 3/29/12 Vote: 21 SENATE PUBLIC SAFETY COMMITTEE : 7-0, 4/17/12 AYES: Hancock, Anderson, Calderon, Harman, Liu, Price, Steinberg SUBJECT : Music And Video Piracy: restitution based on pirated works seized from the offender SOURCE : Recording Industry Association of America DIGEST : This bill provides that in music or video piracy restitution shall include the value of pirated works - works not obtained at wholesale from the copyright holder or licensee - that were seized from the defendant and destroyed. ANALYSIS : Existing law (Penal Code Section 653w) provides that a person is guilty of a crime when he or she knowingly attempts to sell, rent or manufacture, or possess for these purposes, an illicit audio recording or audiovisual work. The essence of this crime is that the defendant failed to disclose the true name and address of the manufacturer and the name of the artist. CONTINUED SB 1479 Page 2 A violation involving at least 100 copies of an audio recording or an audiovisual work is an alternative felony-misdemeanor, punishable by imprisonment for up to one year in the county jail, or in state prison for two, three, or five years, or a fine of up to $500,000, or both. A first violation involving less than 100 copies is a misdemeanor, punishable by up to one year in county jail, or a fine not exceeding $50,000, or both. A subsequent violation involving less than 100 copies is an alternative felony-misdemeanor, punishable by up to one year in county jail, 16 months, two years, or three years in state prison, or a fine not exceeding $200,000, or both. (Penal Code Section 653w.) Existing law includes a number of crimes concerning music piracy, other than Section 653w, which appears to be the most commonly prosecuted of these crimes. These related sections - 653h, 653s and 653u are complex and confusing. Section 653h, subdivision (a), prohibits transferring any recording for purposes of sale or commercial public performance and transporting such recordings for financial gain. An offense involving at least 1000 units is an alternate felony-misdemeanor, with prison triad of two, three or five years and $500,000 fine. An offense involving less than 1000 units is a misdemeanor. A second conviction for fewer than 1000 units is a straight felony, with a maximum fine of $200,000. Section 653h, subdivision (d), prohibits selling or offering for sale, etc. illegally transferred recordings. A first offense involving at least 100 units is a misdemeanor, with maximum one-year jail term and maximum $20,000 fine. A second conviction is an alternate felony- misdemeanor, with maximum $50,000 fine. A first offense involving less than 100 units is a misdemeanor, with maximum six-months jail term and a maximum fine of $10,000. A second offense involving less than 100 units is a misdemeanor, with maximum one-year jail term and maximum $20,000 fine. A third offense involving less CONTINUED SB 1479 Page 3 than 100 units is an alternate felony-misdemeanor, with maximum $25,000 fine. Penal Code Sections 653s and 653u concern unlawful recording and sale of live performances. The elements of the crimes and the fines are equivalent to those in Penal Code Section 653h. Existing provisions in the California Constitution state that all persons who suffer losses as a result of criminal activity shall have the right to restitution from the perpetrators of these crimes. Restitution shall be ordered in every case unless compelling and extraordinary reasons exist to the contrary. The Legislature shall adopt provisions to implement this section during the calendar year following adoption of this section. (Cal. Const. Art. 1 Section 28(b).) Existing law states legislative intent that a victim of crime who incurs any economic loss as a result of the commission of a crime shall receive restitution directly from any defendant convicted of that crime. (Penal Code Section 1202.4, subd. (a)(1).) Existing law directs the court to order a defendant to make restitution to the victim or victims of the defendant's crime. The court shall order full restitution for the losses caused by the defendant's crime unless the court finds and states compelling and extraordinary reasons for not doing so. (Penal Code Section 1202.4, subd. (f).) Existing decisional law provides that restitution must be determined from the losses actually caused by the defendant's crime. ( People v. Lyon (1996) 49 Cal.App.4th 1521.) With the exception of lewd conduct cases, compensable losses are limited to economic losses. ( People v. Giordano (2007) 42 Cal.4th 644. Existing decisional law provides in broadest terms that the restitution "ensures that amends . . . be made to society for the breach of the law, enables people who suffer loss as a result of criminal activity Ýto] be compensated for those losses, and acts as a deterrent to future criminality CONTINUED SB 1479 Page 4 . . . and to rehabilitate the criminal." ( People v. Crow (1993) 6 Cal.4th 952, 958, internal quotation marks omitted.) Restitution orders in probation cases can be somewhat broader than in cases where probation is denied. ( People v. Giordano , supra, 2007) 42 Cal.4th 644, 653; Penal Code Section 1203.1.) Existing law provides that if the amount of restitution cannot be determined at the time of sentencing, the restitution order shall state that the amount will be determined at the direction of the court. (Penal Code Section 1202.4, subd. (f).) Existing law grants the defendant the right to a hearing to dispute the amount of restitution. (Penal Code Section 1202.4, subd. (f)(1).) Existing law states upon a person being convicted of any crime in the State of California, the court shall order the defendant to pay a fine in the form of a penalty assessment. Penalty assessments are calculated at approximately 280 percent of the base fine, which is added to the base fine to determine that actual amount paid by the defendant. (Penal. Code Section 1202.4, subd. (a)(2).) Existing law provides in every case where a person is convicted of a crime, the court shall impose a separate and additional restitution fine unless the court finds compelling and extraordinary reasons for not doing so and states those reasons on the record. (Penal Code Section 1202.4, subd. (b).) This bill provides that in a music or video piracy case, restitution shall include the value of pirated works - described as "displaced legitimate wholesale purchases" - that were seized from a defendant and destroyed. FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local: No SUPPORT : (Verified 4/19/12) Recording Industry Association of America (source) CONTINUED SB 1479 Page 5 ARGUMENTS IN SUPPORT : According to the author: SB 1479 provides clarity as to the amount of restitution that victims may claim under Penal Code 1202.4. When AB 2750 was passed in 2008, the author clearly intended that record companies and their designees (such as RIAA) are entitled to restitution for economic loss arising from the sale, or possession for sale, of Ýpirated] copies of copyright-protected sound recordings and motion pictures. Restitution should be set at the average wholesale price of the items that were illegally possessed by the defendant with the intent to sell. The rationale behind this calculation is that the only way for a party to obtain such copies legally would be to purchase them from an authorized source---in this case, a wholesaler. Thus, by possessing the copies, the pirate displaced the wholesale purchase. The "wholesale" argument used by RIAA has been advanced successfully in many restitution cases. However, a 2011 decision in the case of People vs. Garcia Ý(2011) 194 Cal.App.4th 612] dramatically changed the landscape. In Garcia, the appellate court threw out the wholesale basis for restitution and provided restitution only for past sales of unlawful sound recordings documented in Ýthe defendant's] "pay-owe" sheet and the costs of investigations and assistance to the prosecutor. The court failed to recognize that piracy causes economic harm on the retail and wholesale levels. When a pirate possesses illicit goods for sale, he deprives the owners of the media (record labels, film studios, etc.) of the wholesale transaction that would have occurred had he purchased the product from its legitimate source. If and when a pirate sells his goods to a consumer, he deprives retailers of sales. Thus, the court in Garcia failed to recognize that 1202.4(r) focuses on the actual economic harm to producers of media based on displaced wholesale purchases, and not potentially displaced retail sales. Garcia reduces incentives for prosecutors to pursue piracy cases, since the typical CONTINUED SB 1479 Page 6 case produces little or no jail time, small fines, and, now, little restitution to the victims. SB 1479 will provide clear direction to the courts on how to properly calculate a restitution order and settle, once and for all, the basis that should be used by the courts in determining these values. Piracy causes substantial damage to affected industries. In its 2007 report entitled, "A False Bargain: The Los Angeles County Economic Consequences of Counterfeit Products," the L.A. Economic Development Corporation noted that counterfeiting is not taken seriously as criminal activity. The report, however, argued that "consumers lose when companies Ýreduce] investment in research and development, whether developing new drugs or new music acts. More immediately, piracy causes real losses measurable in revenues, jobs, wages, and taxes." The report stated that motion picture production accounted for nearly $3 billion in losses, while music accounted for $851 million in losses. As a result, local and state government lost substantial tax revenue. RJG:do 4/19/2012 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED