BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
AB 568
Assemblymember Lieu
As Amended May 5, 2009
Hearing Date: July 14, 2009
Business and Professions Code;
Code of Civil Procedure
SK:jd
SUBJECT
Counterfeit Goods: Nuisance
DESCRIPTION
This bill would provide that every nonresidential 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. This
bill would permit a district attorney, city attorney, or any
citizen or resident to bring an action to abate and prevent the
nuisance and perpetually enjoin the person conducting or
maintaining the nuisance. This bill would sunset on January 1,
2015.
(This analysis reflects author's amendments to be offered in
Committee.)
BACKGROUND
Under existing law, a nuisance is defined to mean anything which
is injurious to health or is indecent or offensive to the
senses, or an obstruction to the free use of property, so as to
interfere with the comfortable enjoyment of life or property.
Current law also deems certain uses of buildings or places to be
a nuisance and authorizes a district attorney, city attorney, or
any citizen to bring an action to abate and prevent the
nuisance. Such uses include buildings or places used for the
purposes of illegal gambling or prostitution, unlawfully
selling, serving, storing, keeping, manufacturing, or giving
(more)
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away any controlled substance, and unlawfully selling, serving,
or giving away alcoholic liquor. This bill would similarly deem
a building used for the purpose of willfully manufacturing or
intentionally selling counterfeit goods, or knowingly possessing
those goods for sale, to be a nuisance, allowing a district
attorney, city attorney, or any citizen to bring an action to
abate and prevent the nuisance.
CHANGES TO EXISTING LAW
1. Existing law defines a nuisance as anything which is
injurious to health, including but not limited to, the illegal
sale of controlled substances, or is indecent or offensive to
the senses, or an obstruction to the free use of property, so
as to interfere with the comfortable enjoyment of life or
property, or unlawfully obstructs the free passage or use, in
the customary manner, of any navigable lake, river, bay,
stream, canal, or basin, or any public park, square, street,
or highway. (Civ. Code Sec. 3479.)
Existing law 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.
Existing law provides for criminal fines, imprisonment, or
both, based on the volume of counterfeited goods. Upon a
conviction or plea of nolo contendere, existing law requires a
court to order forfeiture and destruction of all counterfeit
marks, and the means of making the marks, as specified. (Pen.
Code Sec. 350.)
Existing law 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. (Pen. Code Sec.
653w.)
Existing law provides that a person is guilty of a misdemeanor
when he or she maintains or commits any public nuisance or
willfully omits to perform any legal duty relating to the
removal of a public nuisance. (Pen. Code Sec. 372.)
Existing law specifies that a person is guilty of a misdemeanor
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when, after notice from public prosecutors, he or she
maintains, permits, or allows a public nuisance to exist upon
his or her property, or leases the property and maintains,
permits, or allows a public nuisance to exist. Under current
law, the existence of such a nuisance for each and every day
after the service of the notice is deemed to be a separate and
distinct offense. And, it is the duty of the district
attorney or the city attorney, as specified, to prosecute all
persons guilty of violating this section by continuous
prosecutions until the nuisance is abated and removed. (Pen.
Code Sec. 373a.)
Existing law provides that certain uses of buildings or places
constitute a nuisance, including those buildings or places
used for the purposes of: (1) illegal gambling or prostitution
(Pen. Code Sec. 11225); (2) unlawfully selling, serving,
storing, keeping, manufacturing, or giving away any controlled
substance (Health & Saf. Code Sec. 11570); and (3) unlawfully
selling, serving, or giving away alcoholic liquor (Pen. Code
Sec. 11200).
This bill would provide that every nonresidential 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.
This bill would define "counterfeit goods" as 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. Existing law provides that whenever there is reason to
believe that a nuisance as defined (illegal gambling or
prostitution, unlawful sale, storage, or manufacture of
controlled substances, and unlawful sale of liquor) is kept,
maintained, or exists, a district attorney, city attorney, or
any citizen may bring an action to abate and prevent the
nuisance. Current law also specifies procedures for public
prosecutors to follow when proceeding with an action for
abatement and allows the court to order closure of the
premises. (Pen. Code Secs. 11200 et seq., 11225 et seq., and
Health & Saf. Code Sec. 11570 et seq.)
This bill would provide that whenever there is reason to
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believe that a nuisance (for counterfeit goods purposes) is
kept, maintained, or exists, a district attorney, city
attorney, or any citizen or resident may bring an action to
abate and prevent the nuisance and to 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.
This bill would allow the court to order closure of the
premises under certain circumstances, and would require the
court to order the defendant to provide relocation assistance
to displaced tenants not involved in the nuisance activity, as
specified.
This bill would provide that 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
nonresidential building or place of all fixtures, musical
instruments, and other moveable property used in conducting,
maintaining, aiding, or abetting the nuisance. This bill
would additionally allow the court to 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.
This bill would provide that if the court finds that any
vacancy resulting from the closure of the nonresidential
building or place may create a nuisance or that closure is
otherwise harmful to the community, the court may instead
order the person who is responsible for the nuisance or the
person who knowingly permits the manufacture or sale of
counterfeit goods to pay damages to the city or county in
whose jurisdiction the nuisance is located. The damages shall
be in an amount equal to the fair market value of the building
or place for one year and shall be used by the city or county
for the purpose of carrying out counterfeit goods abatement
programs.
This bill would sunset on January 1, 2015.
COMMENT
1. Stated need for the bill
According to the author:
Los Angeles and New York City hold the dubious distinction of
being the nation's leading centers for trafficking in pirated
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and counterfeited goods. Counterfeiting and piracy of goods
such as DVDs, CDs, computer software, clothing, accessories,
and other items, is a multi-billion dollar problem in
California. Los Angeles County is a major center for these
illegal activities. Existing laws provide for criminal
sanctions (often filed as misdemeanors) for counterfeiting and
piracy conduct, but 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 and products.
Jack Kyser, Chief Economist for the Los Angeles County
Economic Development Corporation conducted a study of
counterfeit goods and their economic costs and found:
In Los Angeles County alone, total revenue from
counterfeit goods sales was $5.2 billion in 2005;
Losses from sales diverted by piracy in Los Angeles
County amounted to another $2 billion;
Counterfeiting and piracy have cost Los Angeles County
at least 70,000 manufacturing jobs and 36,000 retail jobs
lost. These are employment losses we can ill afford during
difficult economic times;
The public at large is also harmed. Counterfeiting and
piracy resulted in $482 million in tax revenues . . . lost
to the city and county of Los Angeles because of sales to
the pirates and counterfeiters in 2005. In a time of
critical shortages in public budgets, these massive losses
in tax revenues translate into reductions in vital
services.
The Los Angeles County District Attorney's Office, sponsor of
the measure, asserts that the bill will provide law enforcement
with important new tools, including injunctions, abatement
orders, and civil penalties. This bill is based upon existing
narcotics abatement law and the sponsor explains that the law
has been successfully used by prosecutors and private litigants
in California since 1992. Also, 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 prostitution,
according to the sponsor. The sponsor believes that this bill
will similarly enhance the power of local authorities to combat
counterfeiting and piracy.
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2. Amendments would narrow the bill to address concerns, add
report to better understand the bill's effectiveness, and
ensure consistency with Penal Code provisions
a. Unlawful detainer provisions
In response to concerns that the bill's unlawful detainer
provisions may have unintended consequences, the author has
agreed to remove those provisions from the bill. As a result,
the bill should be amended as follows:
On page 3, strike lines 16-40; strike pages 4-5,
inclusive; on page 6, strike lines 1-27.
Conforming changes need to also be made by striking
lines 5-40 on page 13; strike pages 14-17, inclusive, and
on page 18, strike lines 1-38.
b. Report
As noted above, this bill would sunset on January 1, 2015. In
general, sunset provisions are useful tools when it appears
that actual experience under the law may provide empirical
evidence of the statute's usefulness or its unintended or
undesirable impacts, if any. It can be presumed that the
sponsors will return to the Legislature in 2014 seeking
legislation to either remove or extend that sunset. When
considering such legislation, it would be helpful to evaluate
the effectiveness of this bill's provisions concerning
nuisance abatement actions based on some evidence and
empirical data. As a result, the author has agreed to amend
the bill to require a report to assess the effectiveness of
the nuisance abatement provisions.
c. Specific Penal Code provisions
Existing law provides for criminal sanctions for certain
activities regarding counterfeit goods. Both Penal Code
Section 350 and 653w impose punishment based on the volume of
counterfeited goods. For example, Section 653w provides for
punishment only if at least 100 articles of audio recordings
or audiovisual works are involved. This bill does not have a
similar limitation and would appear to allow a nuisance
abatement action when the premises have been used for
manufacturing, selling, or possessing for sale even one
counterfeit item. Although in a nuisance abatement action
where the prosecutor sought closure of the premises, the court
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must take into account the extent of the nuisance (which
presumably would address this issue in the context of a
nuisance abatement action) the bill arguably permits a
standard that is inconsistent with the Penal Code sections
referenced, and, as a result, the author has agreed to amend
the bill to incorporate the volume of goods standard into the
bill.
Additional amendments to address technical and clarifying
concerns are described in Comments 6 and 7.
3. Whether it is appropriate to declare a nonresidential building
or place used for the manufacture or sale of counterfeit goods
a nuisance
a. Effect of this bill would be to make buildings or places
used for the purpose of
manufacturing or selling of counterfeit goods a nuisance
per se
By providing that any nonresidential building or place used
for the purpose of manufacturing or selling counterfeit goods
is deemed to be a nuisance which shall be enjoined, abated,
and prevented, this bill raises the public policy question of
whether the manufacture or sale of counterfeit goods should be
declared a nuisance. While nuisance is generally thought of
as activities that endanger public health and safety, that is
not necessarily a requirement. Certainly the sale or
manufacturing of illegal drugs or weapons would meet that
standard. So too would prostitution. But, can the same be
said of making or selling counterfeit goods?
Under Civil Code Section 3479, a nuisance is defined to mean
anything which is injurious to health or is indecent or
offensive to the senses, or an obstruction to the free use of
property, so as to interfere with the comfortable enjoyment of
life or property. The existence of an injurious effect must
be shown in order to sustain a nuisance action.
In some cases, however, such an effect does not need to be
proved and instead is presumed. This occurs when a statute
expressly declares a particular use of property to be a
nuisance. Such a use is deemed to be a "nuisance per se."
For example, existing law deems certain uses of buildings or
places to be a nuisance, including those used for the purposes
of: (1) illegal gambling or prostitution; (2) unlawfully
selling, serving, storing, keeping, manufacturing, or giving
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away any controlled substance; and (3) unlawfully selling,
serving, or giving away alcoholic liquor. This bill is
modeled on these statutes.
Under this bill, the harmful effects of making or selling
counterfeit goods would be presumed and, regardless of the
impact on the surrounding community, would be deemed to be a
nuisance.
b. Bill would extend nuisance abatement principles to
criminal activity generally
The American Civil Liberties Union (ACLU) opposes the measure,
arguing that, while counterfeiting may be unlawful, it does
not constitute a nuisance to tenants or neighbors in the same
manner as prostitution, illegal drugs, or illegal weapons.
The ACLU writes, ". . . by extending the 'public nuisance'
designation to counterfeiting and sales, it is hard to imagine
which illegal activities could not be considered a public
nuisance."
The author and his sponsor respond that legitimate businesses
and state and local governments suffer economic losses and
consumers are harmed because they are misled about the goods
they are purchasing. In addition, they state that in many
cases gang activity is involved. The author also writes in
response, "[i]n order to declare a premises a public nuisance
under the provisions of AB 568, the factual finding calls for
substantial proof of a pattern of counterfeiting practices
associated with the particular non-residential location. AB
568 is based as nearly as possible on the content and
procedures used in Health and Safety Section 11570 et seq.,
California's narcotics nuisance abatement law, as these
provisions are already court tested and have been successfully
employed today."
c. Bill would apply to a nonresidential "place"
Under this bill, any nonresidential "place" used for the
purpose of manufacturing or selling counterfeit goods would be
deemed to be a nuisance which shall be enjoined, abated, and
prevented. This is intended to target counterfeiting that
takes place at flea markets, swap meets, and even street
corners.
It is not clear how the bill's provisions would work with
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respect to flea markets, for example. In a nuisance abatement
action, is the intent of the bill to allow the court to close
the entire flea market, or just close down those stalls where
unlawful activity is occurring?
In response to these questions, the sponsor states:
[T]he Superior Court judge, acting under his/her equitable
authority, would only have power to declare those premises
and properties to be nuisances for which there is adequate
evidence to that effect. If evidence exists that ALL the
stalls in a flea market are selling counterfeit goods, then
all those stalls could be declared nuisances and abated.
If no evidence exists that certain premises (here, stalls)
are engaged in nuisance conduct, then no such abatement as
to those premises could occur. This will be entirely
driven by the facts of each case, as it should be. If a
court determines that enough stalls are counterfeiting to
implicate the property as a whole, that is a conclusion the
court should be entitled to reach, if warranted by the
particular facts.
4. Interaction with other existing laws; other available remedies
Existing law currently provides a number of criminal sanctions
which would be applicable to the manufacture or sale of
counterfeit goods. For example, it is a crime to willfully
manufacture, intentionally sell, or knowingly possess for sale
any counterfeit mark. Current law imposes criminal fines,
imprisonment, or both, depending on the volume of counterfeited
goods. It is also a crime to fail to disclose the origin of a
recording or audiovisual work if, for commercial advantage or
financial gain, the individual 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.
Under current law, a person is guilty of a misdemeanor when he
or she maintains or commits any public nuisance or willfully
omits to perform any legal duty relating to the removal of a
public nuisance. And, existing law also specifies that a person
is guilty of a misdemeanor when, after notice from specified
public prosecutors, he or she maintains, permits, or allows a
public nuisance to exist upon his or her property, or occupies
or leases the property and maintains, permits, or allows a
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public nuisance to exist thereon. Under current law, the
existence of such a nuisance for each and every day after the
service of the notice is deemed to be a separate and distinct
offense. And it is the duty of the district attorney or the
city attorney, as specified, to prosecute all persons guilty of
violating this section by continuous prosecutions until the
nuisance is abated and removed.
A landlord may also bring an unlawful detainer action against a
tenant who maintains, commits, or permits a nuisance upon the
premises or uses the premises for an unlawful purpose.
In response to committee staff's inquiries, the sponsor argues
that these provisions of existing law are insufficient to
address the problem of pirated goods. In 2007, the Los Angeles
County District Attorney's Office filed 440 criminal cases
involving piracy and counterfeit goods but nevertheless the
criminal activity reappeared at some of the same locations,
according to the author and sponsor. In addition, the sponsor
hopes that, by permitting public prosecutors to obtain
injunctions and abatement orders against property owners who
allow the unlawful activity to continue on their premises, this
bill will "get the property owner's attention" and provide the
owner with an incentive to enforce the terms of the lease.
5. Bill applies only to commercial properties, not residential
properties
When this bill was heard in the Assembly, it applied to both
commercial and residential properties. The Western Center on
Law and Poverty (WCLP) opposed the measure, arguing that it
unfairly "put tenants at risk of losing their homes and
forfeiting their property . . . based on something less than a
criminal conviction." In response to these concerns, the author
amended the bill to apply to commercial properties only. The
most recent amendments to the bill added the term
"nonresidential" before the words "building or place." These
amendments removed WCLP's opposition.
6. Conforming amendments needed
In order to make this bill consistent with existing nuisance
abatement laws upon which it is based, the bill should be
amended as follows:
a. On page 3, line 7, delete "of the county, the county
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counsel"
b. On page 3, line 8, delete "city prosecutor"
c. On page 6, line 29, delete "district attorney of the
county, the county counsel, the"
d. On page 6, line 32, delete "county counsel,"
e. On page 9, line 30, delete "This bond requirement shall
not apply to any action brought by the district attorney,
county counsel, city attorney, or city prosecutor."
f. On page 11, line 16, delete "or county counsel"
7. Additional amendments
The author has also agreed to the following amendments:
a. Clarify that Section 17803 et seq. applies to willfully
manufacturing, intentionally selling, or knowingly
possessing for sale counterfeit goods as follows: On page
6, line 29, after "nuisance" add "as described in Section
17800"
b. Provide that a property owner shall receive 30-days
notice before a nuisance abatement action may be brought as
follows: On page 6, line 32, after "maintained." insert "A
property owner shall be provided 30-days notice prior to
the filing of an action to abate such a nuisance."
c. Permit the court to order a closure for up to one year
by adding "up to" on page 11, line 1, after the word "of"
Support : Sony Pictures Entertainment; Motion Picture Association
of America; City of Los Angeles; Peace Officers Research
Association (PORAC); California Peace Officers' Association;
California Police Chiefs Association; Los Angeles Area Chamber
of Commerce; Central City Association of Los Angeles; American
Federation of State, County, and Municipal Employees (AFSCME),
AFL-CIO
Opposition : American Civil Liberties Union (ACLU)
HISTORY
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Source : Los Angeles County District Attorney's Office
Related Pending Legislation : None Known
Prior Legislation : None Known
Prior Vote :
Assembly Judiciary Committee (Ayes 10, Noes 0)
Assembly Appropriations Committee (Ayes 15, Noes 0)
Assembly Floor (Ayes 76, Noes 0)
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