BILL ANALYSIS
AB 568
Page 1
Date of Hearing: April 28, 2009
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 568 (Lieu) - As Amended: April 14, 2009
SUBJECT : Counterfeit Goods: Unlawful Detainer
Key issueS :
1)Should properties used for the manufacture and sale of
counterfeit goods be declared a nuisance, subject to the same
legal actions of abatement and unlawful detainer that are
currently available for narcotics abatement?
2)Should this bill be restricted to commercial properties, given
that commercial properties constitute the primary concern and
including residential properties may INADVERTENTLY create
unintended hardships on residential tenants?
3)Is it appropriate to extend nuisance remedies to activities
that, while unlawful, are not a nuisance as usually
understood?
FISCAL EFFECT : As currently in print this bill is keyed fiscal.
SYNOPSIS
This bill, which is sponsored by the Consumer Protection
Division of the Los Angeles County District Attorney's office,
attempts to combat the problem of counterfeiting by giving local
law enforcement officials the power to declare any building or
property on which counterfeiting occurs a public or private
"nuisance." Although existing law already allows law
enforcement to arrest counterfeiters and, upon conviction, seize
counterfeit goods and any equipment used to make the goods,
declaring the properties a nuisance would provide law
enforcement with additional tools. Specifically, this bill
would authorize local law enforcement to obtain nuisance
abatement orders and to bring unlawful detainer actions against
owners who permit the nuisance to occur on their property.
Moreover, these tools can be used without necessarily obtaining
conviction, but can be based only on affidavits of witnesses or
testimony of police officers that the activity is occurring.
AB 568
Page 2
According to the author and sponsor, these additional tools are
needed, as cities like Los Angeles have become global centers
for counterfeiting and piracy of a variety of goods, from
pirated CDs and DVDs to imitation handbags and fashion apparel.
The bill is supported by many law enforcement group, civic and
business associations, the movie and recording industry, and
AFSCME. It is opposed by the Western Center on Law & Poverty
unless amended to exclude residential properties, and by the
ACLU on the grounds that it inappropriately extends nuisance
principles to activity that, while unlawful, is not a nuisance
per se. The Western Center and Committee staff has recommended
to the author and sponsor that the bill be amended to apply only
to commercial property, which according to the sponsor is the
primary area of concern. However, at the time of this writing
the author had not agreed to these amendments, but the analysis
still recommends this change, as well as a five-year sunset for
reasons stated in the analysis.
SUMMARY : Declares that property used for the manufacture, sale,
or knowing possession of counterfeit goods constitutes a
nuisance and authorizes various public and private remedies,
including injunctions, abatement orders, and unlawful detainer
actions, to abate and prevent the nuisance. Specifically, this
bill :
1)Declares that every building or place used for the purpose of
willfully manufacturing, intentionally selling, or knowingly
possessing for sale any counterfeit goods is a nuisance which
shall be enjoined, abated, and prevented, and for which
damages may be recovered. Specifies that "counterfeit goods"
means any counterfeit of a registered state or federal
trademark, or any recording or audiovisual work that does not
disclose the actual manufacturer, author, producer, or artist,
as specified.
2)Provides that whenever it is believed that a nuisance, as
described above, is kept, maintained or exists, a district
attorney, county counsel, city attorney, or city prosecutor
may, in the name of the people, or any citizen or resident in
his or her own name, perpetually enjoin the person conducting
or maintaining the nuisance, and the owner, lessee, or agent
of the building or place from, directly or indirectly,
maintaining or permitting the nuisance.
3)Provides that a district attorney, county counsel, city
AB 568
Page 3
attorney, or city prosecutor may, in the name of the people,
bring an action for unlawful detainer against any person who
engages in or maintains the nuisance. Specifies that the
action may be based on an arrest report or another action or
report by a regulatory or law enforcement agency. Also
specifies that prior to filing the unlawful detainer action,
the designated official must give the owner 30-days notice,
requiring the owner to file an action for removal of the
person engaged in or maintaining the nuisance. If the owner
fails to bring the unlawful detainer within 30 days, then the
right to bring the unlawful detainer shall be assigned to the
district attorney, county counsel, city attorney, or city
prosecutor.
4)Provides that in any unlawful detainer action brought pursuant
to the above provisions, a court may, upon a showing of good
cause, issue a partial eviction ordering the removal of
persons engaging in the nuisance activity, but allowing
innocent tenants to remain.
5)Provides that a court may order closure of the premises under
certain circumstances, and if it does the court may order the
party seeking the closure to provide relocation assistance to
displaced tenants, as specified.
6)If the existence of a nuisance is established in an action
brought under this bill, then the order of abatement shall
direct the removal from the building or place all fixtures,
musical instruments, and other moveable property used in the
conducting, maintaining, aiding, or abetting of the nuisance.
Provides that, in addition, the court may assess a civil
penalty not to exceed $25,000 against any or all of the
defendants, based on the severity of the nuisance and its
duration.
EXISTING LAW :
1)Makes it a crime for any person to willfully manufacture,
intentionally sell, or knowingly possess for sale any
counterfeit mark registered with the Secretary of State or
patented by the United States Patent and Trademark Office.
Provides, upon conviction, for criminal fines, imprisonment,
or both, depending upon the volume of counterfeited goods
involved and the number of prior convictions. Provides
further that the court shall, under certain circumstances,
AB 568
Page 4
take other actions, including the forfeiture and destruction
of counterfeit goods and any equipment or devices used to
manufacture, reproduce, transport, or assemble goods. (Penal
Code Section 350.)
2)Makes it a crime for any person to fail to disclose the origin
of a recording or audiovisual work if, for commercial
advantage or financial gain, he or she knowingly advertises or
offers for sale or rent any recording or audiovisual work, the
cover, jacket, or label of which, does not truthfully disclose
the product's actual manufacturer, artist, performer,
producer, or programmer. (Penal Code Section 653w.)
3)Provides that a tenant who maintains, commits, or permits a
nuisance upon the premises, or who uses the premises for an
unlawful purpose, thereby terminates the lease, entitling the
landlord to restitution of the premises under unlawful
detainer. (Code of Civil Procedure Section 1161(4).)
4)Specifies that a person who illegally possesses certain
firearms or ammunition on the premises, or who illegally
possesses or sells a controlled substance on the premises, or
who uses the premises to further either purpose, shall be
deemed to have committed a nuisance upon the premises for the
purpose of bringing an unlawful detainer against that person.
(Code of Civil Procedure Section 1161(4).)
5)Authorizes, on a pilot project basis, the city attorney or
prosecutor in specified cities to file, in the name of the
people, an action for unlawful detainer against any person who
is engaged in, maintaining, or permitting a nuisance with
respect to the illegal possession or sale of a controlled
substance on the premises. Specifies that the city attorney
or prosecutor may bring this action only if the owner of the
property fails to take action after 30-days, as specified.
Limits this pilot project to the cities of Los Angeles, Long
Beach, Palmdale, San Diego, and Oakland. (Health & Safety
Code Section 11571.1.)
6)Authorizes, on a pilot project basis, the city attorney or
prosecutor in specified cities to file, in the name of the
people, an action for unlawful detainer against any person who
is in violation of the nuisance provisions with respect to
illegally possessing or selling specified weapons or
ammunition on the premises or using the premises to further
AB 568
Page 5
that purpose. Limits this option only to courts having
jurisdiction over unlawful detainer cases involving property
situated in the cities of Los Angeles, Long Beach, San Diego,
Oakland, and Sacramento. (Civil Code Section 3485.)
7)Provides that the pilot projects described in 5) and 6),
above, shall sunset on January 1, 2010. (Civil Code Section
3485(h), Health & Safety Code Section 11571.1(h).)
8)Requires the city attorney or prosecutor in each jurisdiction
participating in the pilot project to provide the Judicial
Council with specified data for the purpose of evaluating the
merits of the above pilot programs. (Civil Code Section
3485(g), Health & Safety Code Section 11571.1(g).)
COMMENTS : According to a 2007 report of the Los Angeles
Economic Development Corporation (LAEDC), counterfeit and
pirated goods are sold every day in Los Angeles in plain site.
Pirated and counterfeit CDs, DVDs, computer software, and
clothing and fashion accessories are openly sold on city
streets, at flea markets and swap meets, and, increasingly, in
commercial storefronts that appear to sell legitimate brand name
items. The report claimed that although many people do not take
piracy or counterfeiting trademarked goods serious - in part
because it has become so easy to download music and movies from
the Internet - piracy and counterfeiting are in fact serious
crimes that cause real and measurable losses in industry
profits, jobs, and tax revenue. The report, based on 2005 data,
noted that the nine economic sectors most vulnerable to piracy
and counterfeiting represent about one-quarter of the total
employment in Los Angeles County. According to the report and
the claims of several of the supporters of this bill, the annual
costs run high indeed: billions of dollars in lost profits; tens
of thousands of lost jobs; and a half-million dollars in lost
sales tax revenue in the City and County of Los Angeles alone.
Alleged Deficiencies in Existing Law : Although existing law
provides criminal sanctions for the counterfeiting of
trademarked goods, this bill's author and sponsor claim that
"these sanctions have proven ineffective in discouraging
business owners from permitting the continued use of their
premises for the manufacture, distribution, and sales of pirated
goods." In 2007 the Los Angles County District Attorney's
office filed 440 criminal cases involving counterfeiting and
piracy of goods, but according to the author and sponsor,
AB 568
Page 6
despite these actions, the criminal activity reappears at some
of the same locations. Therefore, in order to supplement the
usual criminal sanctions against the perpetrators of the crimes,
the sponsor seeks additional tools that will allow local
authorities to go after the property owners who permit the
illegal activity to continue on their premises. In short, by
proclaiming that premises used for the manufacture and sale of
counterfeit goods are a nuisance, this bill would make it easier
for local authorities, and even private citizens, to obtain
injunctions and abatement orders against the persons conducting,
and property owners permitting, the unlawful activity. In order
to better effectuate this goal, the measure would also permit a
district attorney, county counsel, or city attorney or
prosecutor, to file an action for unlawful detainer against any
person who engages in the nuisance or permits it to occur.
Recent and Pending Efforts to Use Unlawful Detainer Actions to
Combat Illegal Activity : This bill is modeled nearly verbatim
on Health & Safety Code Section 11570 et seq., the state's
narcotics nuisance abatement pilot project, which allows local
authorities to take aggressive abatement and unlawful detainer
actions against properties that are used for illegal drug
activity. More recently legislation has extended the nuisance
abatement and unlawful detainer combination to combat the
illegal sale and possession of weapons and ammunition. Indeed
recent legislative efforts, including AB 530 which is pending
before this Committee, have generally sought to make these
temporally and geographically limited pilot projects permanent
and statewide.
ARGUMENTS IN SUPPORT: According to the sponsor, the Los Angeles
County District Attorneys Office, this measure will provide law
enforcement with important new tools, including injunctions,
abatement orders, civil penalties, and unlawful detainer
actions. The sponsor contends that the unlawful detainer
provisions, in particular, will be useful in taking action
against "recalcitrant tenants, where evidence sufficiently
supports allegations that the premises are being used for the
purpose of manufacturing and selling counterfeit goods." The
sponsor claims that the narcotics abatement law upon which AB
568 is based has been successfully used by prosecutors and
private litigants in California since 1992, and California's Red
Light Abatement Law, which grants local authorities increased
powers by declaring a property used for unlawful purposes a
public nuisance, has been used successfully to combat
AB 568
Page 7
prostitution. This bill, the sponsor believes, will similarly
enhance the power of local authorities to combat counterfeiting
and piracy.
Business and commercial associations, such at the Valley
Industry Commerce Association (VICA) and the Central City
Association (CCA) of Los Angeles, cite the detrimental economic
effect of the loss of legitimate sales and corresponding tax
revenues, which is especially harmful in light of recent
economic and budgetary woes. The CCA notes that the locations
where these goods are sold are "readily identifiable," and that
this measure will "provide law enforcement with an additional
tool in their arsenal to attack this growing problem." VICA
adds that property owners should be held accountable when they
permit their premises to be used for the manufacture and sale of
pirated and counterfeit goods. The American Federation of
State, County, and Municipal Employees (AFSCME) and the Police
Officers Research Association of California (PORAC) support this
bill for substantially similar reasons, adding that this measure
will provide communities with additional tools to combat the
problem.
Associations representing the recording and motion picture
industries support this measure because of the direct impact
that it has on their industries. The Recording Industry
Association of American (RIAA) claims that music piracy alone
results in an estimated $1.63 billion loss in the United States
annually and the loss of tens of thousands of jobs in the
recording industry and related retail industry. The Motion
Picture Association of America claims that "the counterfeiting
of movies and TV programs comprises a large underground economy,
stealing tax revenues from every level of government and
depriving the economy of legitimate jobs."
ARGUMENTS IN OPPOSITION: The Western Center on Law and Poverty
(WCLP) opposes this bill unless it is amended to apply only to
non-residential properties. WCLP believes that if the problem
that this bill seeks to address primarily involves commercial,
not residential, properties, as the author and sponsor contend,
then the bill should only apply to commercial properties.
Absent compelling evidence that production and sale occurs to
any large extent in residential properties, WCLP thinks that it
is unfair "to put tenants at risk of losing their homes and
forfeiting their property (there leasehold interests) based on
something less than a criminal conviction." Yet this is exactly
AB 568
Page 8
what this measure will do, WCLP contends. As WCLP explains its
opposition further:
We are especially concerned with the potential for
abuse when the landlord has a substantial economic
incentive to evict an innocent tenant. This arises in
cities, such as Los Angeles, with a rent stabilization
and/or a just cause for eviction ordinance. Under the
terms of the state "Costa- Hawkins" law, when a tenant
is evicted for cause, the landlord is entitled to set
the rent to any level for the new, incoming tenant. In
many cases, the difference between what the new and
the old tenant was paying is very substantial, often a
doubling or tripling of the rent. The drug pilot
project upon which AB 568 is based has seen these
types of abuses.
The American Civil Liberties Union (ACLU) opposes this bill
because, by creating an entirely new "public or private
nuisance," it will allow government to evict persons from their
homes and deprive persons and businesses of property rights
without obtaining a conviction. Moreover, ACLU argues that,
while counterfeiting may be unlawful, it does not constitute a
nuisance to tenants or neighbors in the same manner as
prostitution, illegal drugs, and illegal weapons. "By extending
the 'public nuisance' designation to counterfeiting and sales,"
the ACLU persuasively concludes, "it is hard to imagine which
illegal activities could not be considered a public nuisance."
Should this bill apply only to Non-Residential Properties and
Tenants? Because the Committee staff shares many of the
concerns raised by the WCLP and ACLU, both the Committee staff
and WCLP asked the author to consider restricting this measure
to commercial property only, so that residential tenants would
not lose their homes because of the activities of others or the
refusal of landlords to take action against the unlawful
activity. Both the author and the sponsor, as well as the many
reports submitted by both, indicate that the counterfeiting that
this bill targets takes place almost exclusively in commercial
properties or non-residential locations, such as store fronts,
flea markets or even on street corners. To be sure this bill,
like the narcotics abatement provisions after which it is
modeled, provides for a "partial eviction" that would allow an
innocent tenant to remain on the premises, but only by a special
order granted at the discretion of the court. Furthermore, by
AB 568
Page 9
declaring these properties public nuisances, this bill would not
only allow for evictions; it would also authorize the closing of
buildings entirely as part of a general abatement order [See
subdivision (b) of proposed Section 17805, page 7, line 21.]
While it is true that an order of closure may be accompanied by
the provision of relocation assistance to innocently displaced
tenants, such an action would nonetheless impose a substantial
hardship on innocent parties, even if relocation assistance is
provided.
Is it appropriate to extend nuisance abatement principles to
criminal activity generally ? This bill would declare by fiat
that any building or property used for the purpose of the
manufacture or sale of counterfeit goods is, by definition, a
public and private nuisance, at least for purposes of remedies
available to law enforcement. But a "nuisance" is defined, as a
matter of law, as the unreasonable use of one's property in a
manner that produces some material annoyance, inconvenience, or
interference with others in the quiet enjoyment of their
property. A "public nuisance" is generally defined as an act
that affects the public at large or a large number of persons,
especially when that act endangers the public health, safety, or
welfare. A "private nuisance" generally includes invading the
private use and enjoyment of property by a single individual or
by a small number of people. (See e.g. Black's Law Dictionary,
5t Ed.) Certainly illegal drugs, weapons, and prostitution
endanger public health and safety, but can the same really be
said of counterfeit goods? That this activity is unlawful and
harmful no one disputes; that is, it takes profits away from the
legitimate producers of these goods and misrepresents the nature
of goods to consumers who purchase them. But by this reasoning,
as the ACLU notes above, any criminal activity could be declared
a private or public nuisance, allowing the state to take
coercive action against alleged criminal activity without
obtaining a conviction.
It should also be reiterated that this bill is modeled almost
word-for-word on a time-limited pilot project restricted to five
cities. In addition, the provisions after which this bill is
modeled called for a study to assess the effectiveness of these
methods. Yet the provisions of this bill would be permanent and
state-wide.
POTENTIAL COMMITTEE AMENDMENTS : In light of the above
concerns, the Committee may wish to discuss with the author the
AB 568
Page 10
potential merits of the following amendments:
Possible Amendment #1 : In order to protect residential
tenants, add a provision specifying that the provisions of
this chapter "shall only apply to non-residential
properties."
Possible Amendment #2 : Because this bill extends nuisance
principles into a new area and is modeled on a pilot
project, this bill should be limited by a five-year sunset,
so that the practical consequences of this proposed
innovation can be re-revisited and re-assessed.
PENDING RELATED LEGISLATION: AB 530 (Krekorian) provides
city attorneys and prosecutors statewide with authority,
previously limited to only those participating in a pilot
program, to bring nuisance abatement and unlawful detainer
actions against properties that permit the unlawful
possession or sale of firearms or ammunition.
REGISTERED SUPPORT / OPPOSITION :
Support
Los Angeles County District Attorney's Office (sponsor)
American Federation of State, County, and Municipal Employees
(AFSCME)
Central City Association of Los Angeles
Motion Picture Association of America
Peace Officers Research Association of California (PORAC)
Recording Industry Association of America
SONY Pictures Entertainment
Valley Industry and Commerce Association
Opposition
American Civil Liberties Union (ACLU)
Western Center on Law and Poverty (unless amended)
Analysis Prepared by : Thomas Clark / JUD. / (916) 319-2334