BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1241| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 1241 Author: Calderon (D) Amended: 3/26/15 in Assembly Vote: 21 SENATE PUBLIC SAFETY COMMITTEE: 7-0, 6/21/16 AYES: Hancock, Anderson, Glazer, Leno, Liu, Monning, Stone ASSEMBLY FLOOR: 78-0, 5/4/15 (Consent) - See last page for vote SUBJECT: Crimes: audiovisual work: recording SOURCE: Recording Industry Association of America DIGEST: This bill requires a sentencing court to impose a mandatory minimum fine of at least $1,000 for a second or subsequent conviction of audio or video piracy. ANALYSIS: Existing law: 1)Provides that a person is guilty of the failure to disclose the origin of a recording or audiovisual work (piracy) 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 outside cover, box, jacket, or label of which does not clearly and conspicuously disclose the actual true name and address of the manufacturer thereof and AB 1241 Page 2 the name of the actual author, artist, performer, producer, programmer, or group thereon. (Pen. Code, § 653w, subd. (a)(1).) 2)Provides that if the offense involves at least 100 articles of audio recordings or audiovisual works, or the commercial equivalent thereof, then the punishment is imprisonment in a county jail not to exceed one year, by imprisonment pursuant to criminal justice realignment for two, three, or five years, by a fine not to exceed $500,000, or by both that fine and imprisonment. (Pen. Code § 653w, subd. (b)(1).) 3)Punishes any other first-time violation of the crime by imprisonment in a county jail not to exceed one year, by a fine of not more than $50,000, or by both that fine and imprisonment. (Pen. Code § 653w, subd. (b)(2).) 4)Punishes a second or subsequent conviction by imprisonment in a county jail not to exceed one year, or by imprisonment pursuant to criminal justice realignment, by a fine not more than $200,000, or by both that fine and imprisonment. (Pen. Code § 653w, subd. (b)(3).) 5)Defines "recording" as any "tangible medium upon which information or sounds are recorded or otherwise stored, including, but not limited to, any phonograph record, disc, tape, audio cassette, wire, film, memory card, flash drive, hard drive, data storage device, or other medium on which information or sounds are recorded or otherwise stored, but does not include sounds accompanying a motion picture or other audiovisual work." (Pen. Code § 653w, subd. (a)(2).) 6)Defines "audiovisual works" as the "physical embodiment of works that consist of related images that are intrinsically intended to be shown using machines or devices, such as projectors, viewers, or electronic equipment, together with accompanying sounds, if any, regardless of the nature of the material objects, such as films, tapes, discs, memory cards, flash drives, data storage devices, or other devices, on which the works are embodied." (Pen. Code § 653w, subd. (a)(3).) 7)Requires, in addition to any other penalty or fine, the court to order a person who has been convicted of a music or video piracy to make restitution to an owner or lawful producer, or AB 1241 Page 3 trade association acting on behalf of the owner or lawful producer, of a phonograph record, disc, wire, tape, film, or other device or article from which sounds or visual images are derived that suffered economic loss resulting from the violation. (Pen. Code § 1202.4, subd. (r)(1).) 8)Requires the restitution order be based on the aggregate wholesale value of lawfully manufactured and authorized devices or articles, and to also include reasonable costs incurred as a result of the investigation undertaken by the owner, lawful producer, or trade association acting on behalf of the owner. (Pen. Code § 1202.4, subd. (r)(1). This bill imposes a mandatory minimum fine of not less than $1,000 for a second or subsequent conviction for the crime of music or video piracy, as prosecuted under the California law that requires a person to disclose the true name and address of the manufacturer of a musical or audio work. Background: According to the author: Crimes related to piracy are often viewed as victimless. As such, they are often treated lightly by the courts. While there are opportunities for the courts to establish fines, there is no mandatory fine in cases involving piracy of copyright, intellectual property, despite the unquestioned impact upon the entertainment and other industries affected by these illegitimate activities. AB 1241 would create a minimum fine of $1,000 on a second offense. In audio and audio-visual piracy, restitution is defined to include the value of unsold items seized from the defendant. As the items did not actually replace a legitimate sale, the value of these items is not truly restitution for a loss. (People v. Garcia (2011) 194 Cal.App.4th 612, 614-622.) The restitution is essentially a fine paid to the victim in an amount measured by the value of the illegitimate sales the defendant would have made if he or she had actually sold the items. This form of restitution is a penalty based the defendant's criminal intent, not actual losses suffered by the victim and appears to be AB 1241 Page 4 similar to punitive damages ordered in a civil suit. This bill requires payment of a traditional fine. A criminal fine is paid to the government, not the victim. Criminal fines are generally imposed based on the culpability of the defendant. The fact that a defendant would have made additional illicit sales had he or she not been caught is such a consideration. A fine can also reflect the harm the defendant's conduct more generally caused society. Federal law preempts state law in the area of copyright. State laws related to copyright interests are generally called "true name and address" laws, which are intended to protect consumers and prohibit specified forms of unfair competition. Penal Code Section 653w is a form of true name and address law. In Anderson v. Nidorf (9th Cir. 1994) 26 F.3d 100, the United States 9th Circuit Court of Appeals upheld the California true name and address law. The defendant's claim that the true name and address law (Pen, Code § 653w) is preempted by federal copyright has been rejected by the 9th Circuit. A state law can protect copyright interests if the law has other purposes that are legitimate subjects of state law. The "underground economy" refers to those individuals and businesses that deal in cash and/or use other schemes to conceal their activities, identities, and true tax liabilities from government licensing, regulatory, and taxing agencies. The activities that occur in the underground economy include the sale or transfer of illegal goods, such as pirated music or movies, counterfeit pharmaceutical drugs and numerous other products. The Board of Equalization estimates that the State of California losses about $8.5 billion dollars annually in tax revenue due to the underground economy. This revenue is needed to fund critical programs such as education, public safety, infrastructure and social services. Setting the penalty for a crime is an inherently legislative function. The Legislature does have the power to require a minimum fine or other specific sentence. (Keeler v. Superior Court (1970) 2 Cal.3d 619, 631.) Sentencing, however, is solely a judicial power. (People v. Tenorio (1970) 3 Cal.3d 89, 90-93; People v. Superior Court (Fellman) (1976) 59 Cal.App.3d 270, 275.) California law effectively directs judges to impose an individualized sentence that fits the crime and the defendant's AB 1241 Page 5 background, attitude, and record. (Cal. Rules of Court, rules 4.401-4.425.) This bill limits judicial discretion and requires a minimum fine of $1,000 to be imposed in each case in which a defendant has already suffered a prior conviction for piracy, regardless of the facts. A sentencing court also has the authority and discretion to impose a much higher fine than the minimum required under this bill. The maximum fine under existing law is $200,000 - approximately $800,000 with penalty assesssments. There is no evidence that this amount is not already being imposed in these types of cases. Penalty assessments and fees must be assessed on the base fine for a crime. Assuming a defendant was fined $1,000 as the fine for a criminal offense, a host of penalty assessments would actually require the defendant to pay a fine of over $4,000. The fine does not include victim restitution, a mandatory restitution fine, and other fines and fees. Current law under Penal Code section 1203.1d prioritizes the order in which delinquent court-ordered debt received is to be satisfied. The priorities are 1) victim restitution, 2) state surcharge, 3) restitution fines, penalty assessments, and other fines, with payments made on a proportional basis to the total amount levied for all of these items, and 4) state/county/city reimbursements, and special revenue items. The fine at issue in this bill has a fairly low priority in the collection order, falling in the third category. Given that victim restitution in these types of cases is to be on the aggregate wholesale value of lawfully manufactured and authorized devices or articles, and to also include reasonable costs incurred as a result of the investigation undertaken by the owner, lawful producer, or trade association acting on behalf of the owner (Pen. Code, § 1202.4, subd. (r)(1)), it could very well be the case that this fine is unlikely to be collected, especially if the defendant is ordered to pay special restitution based on the value of unsold pirated works. A recent San Francisco Daily Journal article noted, "California courts and counties collect nearly $2 billion in fines and fees every year. Nevertheless, the state still has a more than $10.2 billion balance of uncollected debt from prior years, according to the most recent date from 2012." (See Jones & Sugarman, AB 1241 Page 6 State Judges Bemoan Fee Collection Process, San Francisco Daily Journal, (January 5, 2015).) "The annual growth in delinquent debt partly reflects a supply of money that doesn't exist to be collected." (Ibid.) In the same article, the Presiding Judge of San Bernardino County was quoted as saying "the whole concept is getting blood out of a turnip." (Ibid.) FISCAL EFFECT: Appropriation: No Fiscal Com.: NoLocal: No SUPPORT: (Verified6/23/16) Recording Industry Association of America (source) OPPOSITION: (Verified6/23/16) None received ASSEMBLY FLOOR: 78-0, 5/4/15 AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins NO VOTE RECORDED: Campos, Dahle Prepared by:Jerome McGuire / PUB. S. / 6/24/16 14:33:37 **** END **** AB 1241 Page 7