BILL ANALYSIS
AB 819
Page 1
Date of Hearing: April 28, 2009
Counsel: Nicole J. Hanson
ASSEMBLY COMMITTEE ON PUBLIC SAFETY
Jose Solorio, Chair
AB 819 (Calderon) - As Amended: April 15, 2009
SUMMARY : Creates the Intellectual Property Piracy Prevention
and Prosecution (IPPPP) Program to fund grants for local law
enforcement and district attorneys for the purposes of
preventing and prosecuting intellectual property piracy.
Specifically, this bill :
1)Removes the creation and distribution of counterfeit software
and pirated sound recordings from the list of high technology
crimes to be under the purview of the High Technology Crime
Advisory Committee (HTCAC).
2)Establishes the IPPPP Act of 2009.
3)Finds and declares the following:
a) According to a 2007 study by the Institute for Policy
Innovation, intellectual property piracy, meaning the theft
of movies, music, software, and video games, costs the
United States economy $58 billion each year.
b) The problem of intellectual property piracy continues to
grow worse. A 2005 Gallup study found that 5% of Americans
had purchased, copied, or downloaded counterfeit music in
the preceding year. By 2007, this number had jumped to 9%.
The percentage of respondents that admitted buying a
pirated movie rose from 3% in 2005 to 6% in 2007. At the
same time, once robust DVD sales have flattened over the
past few years, while CD shipments to retailers have
plummeted.
c) The effect of intellectual property piracy on California
and its citizens is particularly dire. Intellectual
property piracy adversely affects the California economy,
eliminates jobs, and damages industry. According to the
Business Software Alliance, in 2003, software piracy alone
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cost the California economy more than 13,000 jobs, over
$802 million in wages and salaries, over $1 billion in
retail sales of business software applications, and roughly
$239 million in total tax losses. This act will send a
strong signal that California is committed to protecting
the intellectual property created by California's
innovation and entertainment industries.
d) By creating a technical advisory committee, California
will be able to draw upon the expertise and insight of
those on the front lines of the anti-piracy effort.
e) Grants awarded pursuant to this act will be used to
foster innovation and to provide local law enforcement and
prosecutors the tools they need to effectively fight
intellectual property piracy.
f) Finally, by safeguarding the legitimate sale of
intellectual property, California will increase its tax
base, and stimulate the economy.
4)Mandates that funds provided under this program are intended
to ensure that law enforcement and prosecutors are equipped
with the necessary personnel and equipment to combat
successfully intellectual property piracy, which includes
piracy of movies, music, software, and video games.
5)Creates within the Department of Justice (DOJ), a program of
financial assistance for law enforcement and district
attorneys' offices, designated the IPPPP Program. Upon
appropriation by the Legislature, all funds appropriated to
the DOJ for the purposes of this chapter shall be administered
and disbursed by the Attorney General (AG) in consultation
with the IPPPP Advisory Committee as established and shall, to
the extent feasible, be coordinated with funds derived and
private grants or private donations that are made available
for these purposes.
6)Provides that all funds designated for use for purposes of
this chapter shall be deposited in the IPPPP Fund, which is
hereby established. The fund shall be under the direction and
control of the office of the AG. The fund may also accept
private donations.
7)Requires the advisory committee to review grant applications
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and, on a majority vote of the membership, submit those
applications to the AG for formal approval.
8)States that the advisory committee shall monitor and audit the
use of grant funds.
9)Necessitates that grant money must be used exclusively to
combat intellectual property piracy within California. Grants
shall be made on an annual basis, and may not be used to pay
existing staff, absent extraordinary circumstances and
approval by the AG. Grant recipients may receive funding for
no more than three years without submitting another grant
application. Grants shall only be made to applicants with an
existing budget dedicated to fighting intellectual property
piracy.
10)Demands that in order to receive a grant, prospective
recipients shall agree in writing to the following terms, as
conditions of receiving a grant:
a) The recipient is authorized to accept grant funds under
all applicable state and local laws.
b) The recipient will vigilantly safeguard grant funds and
ensure that use of the grant funds fully comports with the
purposes specified in the application for the grant funds,
as approved or modified by the advisory committee.
c) Grant funds shall be used to augment, but shall not be
used to supplant, a grant recipient's budget.
d) If the grant funds are used for the purpose of
investigation, litigation, or prosecution, any remedy,
settlement, judgment, or restitution award shall provide
for full reimbursement to the IPPPP Fund of all grant funds
used for that investigation, litigation, or prosecution.
e) The recipient shall notify the advisory committee in
writing of litigation or prosecution results, including any
settlement, judgment, or other resolution, within 30 days.
f) The recipient shall notify the advisory committee in
writing of the status of all outstanding investigations,
litigation, or prosecutions funded in whole or in part by
the grant six months after the funds are disbursed, and
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every 12 months thereafter until all disbursed funds have
been expended and reported on.
g) The recipient shall fully cooperate with the advisory
committee and its agents in providing all information and
documents concerning the use of grant funds.
h) Except as otherwise expressly agreed by the advisory
committee, within 60 days after the conclusion of the
investigation, litigation, or prosecution, training, or
other activity for which the disbursement was awarded, the
recipient shall return all unused funds to the advisory
committee by check made payable to the IPPPP Fund.
i) If grant funds are used for the production of any
materials, the recipient shall permit the AG's Office and
the advisory committee to use and distribute those
materials without restriction for their intended purposes.
j) The advisory committee is authorized to audit, review,
and inspect the recipient's activities, books, documents,
papers, and records during the project and thereafter for
three years following the final allocation of funds.
11)Establishes the IPPPP Advisory Committee for the purpose of
formulating a comprehensive written strategy for addressing
intellectual property piracy prevention and prosecution
throughout California, and to advise the AG on the appropriate
disbursement of funds to local law enforcement agencies and
district attorneys' offices.
12)Requires the IPPPP Advisory Committee to identify various
priorities for law enforcement attention regarding the
following:
a) The apprehension and prosecution of criminal
organizations, networks, and groups of individuals engaged
in the theft of, counterfeiting of, or unauthorized
distribution, sale, or reproduction of, the following types
of intellectual property:
i) Movies.
ii) Music.
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iii) Computer software.
iv) Video games.
b) The investigation and prosecution of violations of
criminal and civil provisions of law.
c) The advising of local law enforcement and district
attorneys regarding current aspects of intellectual
property piracy, in order to respond quickly to the most
serious threats of piracy.
13)Asks the IPPPP Advisory Committee to meet at least four times
per year, shall consist of 10 members, of whom six shall be
appointed by the Governor, two by the Speaker of the Assembly,
and two by the Senate Committee on Rules. Members shall be
paid $100 per diem for each meeting, as well as all necessary
travel expenses. The advisory committee shall be composed of
the following members:
a) At least two representatives of the general public.
b) At least one representative with demonstrable knowledge
of the movie industry.
c) At least one representative with demonstrable knowledge
of the music industry.
d) At least one representative with demonstrable knowledge
of the computer software industry.
e) At least one representative with demonstrable knowledge
of the video gaming industry.
f) At least one representative with experience in law
enforcement, specifically relating to intellectual property
piracy offenses.
g) At least one representative with experience prosecuting
intellectual property piracy offenses at the local, state,
or federal level.
14)Proscribes that in deciding which grant applications to fund,
the IPPPP Advisory Committee shall consider the following
factors:
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a) The purpose for which the funds are sought.
b) The proposal's specificity, including whether the
proposal identifies anticipated costs, along with materials
and personnel to be used.
c) The anticipated public benefit.
d) The ability of the advisory committee to audit the use
of the funds.
e) The number, amount, and use of previous grants awarded
to the prospective recipient, if any.
15)Entitles members of the IPPPP Advisory Committee to the same
immunity from liability that is provided to public employees.
EXISTING LAW :
1)States legislative intent to provide local law enforcement and
district attorneys with the tools necessary to successfully
interdict the promulgation of high technology crime.
According to the federal Law Enforcement Training Center, it
is expected that states will see a tremendous growth in high
technology crimes over the next few years as computers become
more available and computer users more skilled in utilizing
technology to commit these faceless crimes. High technology
crimes are those crimes in which technology is used as an
instrument in committing, or assisting in the commission of, a
crime, or which is the target of a criminal act. [Penal Code
Section 13848(a).]
2)Disperses funds through the High Technology Theft Apprehension
and Prosecution Program to ensure that law enforcement is
equipped with the necessary personnel and equipment to
successfully combat high technology crime which includes
software piracy and other unlawful duplication of information.
[Penal Code Section 13848(b)(5).]
3)Establishes the HTCAC for the purpose of formulating a
comprehensive written strategy for addressing high technology
crime throughout California, with the exception of crimes that
occur on state property or are committed against state
employees, and to advise the California Emergency Management
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Agency on the appropriate disbursement of funds to regional
task forces. Priorities identified include the apprehension
and prosecution of criminal organizations, networks, and
groups of individuals engaged in the creation and distribution
of counterfeit software and other digital information,
including the use of counterfeit trademarks to misrepresent
the origin of that software or digital information. Also
included are those engaged in the creation and distribution of
pirated sound recordings or audiovisual works or the failure
to disclose the origin of a recording or audiovisual work.
[Penal Code Section 13848.6.]
4)Requires the Executive Director of the agency or agencies
designated by Department of Finance (DOF) to appoint the Chair
and the following members to the HTCAC:
a) The California District Attorneys Association.
b) The California State Sheriffs Association.
c) The California Police Chiefs Association.
d) The Attorney General.
e) The California Highway Patrol.
f) The High Tech Criminal Investigators Association.
g) The representative of the agency of agencies designated
by the DOF Director.
h) The American Electronics Association to represent
computer system manufacturers.
i) The American Electronics Association to represent
software producers.
j) The California Cellular Carriers Association.
aa) The California Internet Industry Alliance.
bb) The Semiconductor Equipment and Materials International.
cc) The California Cable Television Association.
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dd) The Motion Pictures Association of America.
ee) Either the California Telephone Association or the
California Association of Long Distance Companies.
ff) The California banking industry.
gg) The Office of Privacy Protection.
hh) The Department of Finance. [Penal Code Sections
13848.6(c) and (d).]
5)States that the HTCAC shall not be required to meet more than
12 times per year, and may create subcommittees of its own
membership which may meet as often as the members find
necessary. [Penal Code Section 13848.6(e).]
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's Statement : According to the author, "California
remains the capital of the motion picture and television
industry as well as a center for the recording and software
industries. In terms of economic activity, television and
movies generated a total of $42.2 billion, split almost
equally between payroll expenditures and payments to vendors.
Approximately 266,000 people were directly employed in the
motion picture and television industry in California, with an
average salary of $80,600. When indirect employment resulting
from the industry is factored in, the number of people working
in California as a result of television and movies totals over
500,000.
"Although piracy is a global problem, a recent study by the Los
Angeles County Economic Development Corporation (LAEDC) notes
that it affects the L.A. region disproportionately due to the
concentration of the entertainment industry there. LAEDC
estimates that in 2005 losses to the motion picture industry
from piracy were $2.7 billion; the sound recording industry
$851 million; software publishing $355 million.
"Not only is digital piracy a direct threat to the industry, but
its effects are felt by state and local government in the form
of lost tax revenues.
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"According to the same LAEDC study, piracy affecting the
entertainment industry just in LA cost nearly $134 million in
state income taxes; $63.5 million in sales taxes; $2 million
in LA City Business Taxes.
"This is not just an LA problem.
"Digital piracy reaches across the state, affecting the Silicon
Valley and its computer industry. According to the Business
Software Alliance, in 2003, software piracy alone cost the
California economy more than 13,000 jobs, $802 million in
wages and salaries, over $1 billion in retail sales of
business software applications, and roughly $239 million in
total tax losses."
2)Background : According to information provided by the author,
"AB 819 would help law enforcement tackle the issue of piracy
statewide by establishing the Intellectual Property Piracy
Prevention and Prosecution Program to fund grants for local
law enforcement and district attorneys for purposes of
preventing and prosecuting intellectual property piracy,
funded by public and private sources. It also establishes a
technical advisory committee that would include members of the
affected industries to award these grants."
3)Piracy : In the 1980's, the Legislature established what was
then a strong policy against the piracy of music and film
recordings. California's criminal anti-piracy statute
prohibits selling recordings without disclosing the
manufacturer and author of the recording. The improper
labeling of 1,000 audio recordings or 100 audiovisual works
can be prosecuted as either a misdemeanor or a felony.
However, technology has changed significantly since the policy
was established, making the production and distribution of
pirated works easier, the network broader, and the recording
of higher quality. Pirates, bootleggers, and counterfeiters
now have at their disposal the technology to make near-perfect
copies. The advancing technology is creating more
sophisticated labeling and packaging techniques as well as
facilitating the transmission of film and music
electronically. Because of the ease by which these products
can be produced and transmitted, piracy continues to grow at
all levels - in local flea markets, street corners where
tables of pirated works are standard fare, and on the
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Internet. The worldwide impact on the film and music
industries is now estimated to be in excess of $8 billion
annually in lost revenues.
Piracy negatively impacts artists, film and recording companies,
performers, composers, distributors, wholesalers, and
retailers. This activity has a significant negative effect on
consumers, as fewer and fewer dollars are made available to
invest in bringing consumers the musical and film diversity
they have come to expect from America's entertainment
industries. The impact of piracy on trade and international
competitiveness cannot be understated.
4)Economic Impact of Music Piracy : According to the California
Chamber of Commerce, "California loses $34 billion annually to
counterfeiting and piracy. In 2005, Los Angeles County alone
lost 106, 000 jobs because of the trade of counterfeit goods.
This trend cuts to the heart of the Entertainment Industry,
whose lifeblood is authentically produced content."
In testimony before the Select Committee on the Preservation of
California's Entertainment Industry on February 1, 2008, Joel
Flatow, Senior Vice President, Recording Industry Association
of America (RIAA), stated, "Music has never been as accessible
to fans as it is right now, and, our studies show that more
music is being acquired than ever - but less and less of it is
being paid for. And, therein lies one of the great
challenges. It's just too easy to get for free without
compensating the creators, including cheap counterfeit goods.
On the label side . . . the truth is that sales have been
decimated, certainly at least in part from piracy . . . the
sale of recorded music has been down for the last 7 of 8
years, amounting to an aggregate fall from 1999 through 2007
of roughly 25% and more than $3 billion decline in sales.
According to a recent report on music piracy by the Institute
for Policy Innovation (IPI), this translates into 70,000 lost
jobs and almost $2.7 billion in wages for US workers. Right
here in California, the IPI study indicates that but for
piracy the state of California would employ 21,227 more
workers, which translates into more than $930 million in lost
wages."
In considering prior legislation, AB 64 (Cohn), in 2006, the
Committee on Arts, Entertainment, Sports, Tourism and Internet
Media found, "Many do not understand the significant negative
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impact of piracy on the music industry. Though it would
appear that record companies and artists are still making
money, these impressions are mere fallacies. Each sale by a
'pirate' represents a lost legitimate sale; thereby depriving
not only the record company of profits but also the artist,
producer, songwriter, publisher, retailer, and the list goes
on. Consumers also lose because the shortcut savings enjoyed
by pirates drive up the costs of legitimate product for
everyone. Not including losses due to Internet piracy, the
sale of pirate recordings exceeds $4.2 billion worldwide.
Eighty-five percent of recordings released do not even
generate enough revenue to cover their costs. Record
companies depend heavily on the profitable 15% of recordings
to subsidize the less profitable types of music, to cover the
costs of developing new artists, and to keep their businesses
operational. Often, the thieves do not focus on the 85%; they
go straight to the top and steal the gold. Creative artists
lose. Musicians, singers, songwriters and producers do not
get the royalties and fees they have earned. Virtually all
artists (95%) depend on these fees to make a living.
"The Los Angeles Police Department's (LAPD) anti-piracy unit, in
coordination with the RIAA, is aggressively attacking music
piracy. In one instance a private residence was searched and
LAPD seized 22 CD-R burners; 2 computers; 4 DVD records; 6,812
alleged counterfeit compact discs; and 349 counterfeit DVD's.
A 14-month investigation by the Orange County District
Attorneys and the RIAA resulted in a two-year sentence for the
defendant, from whom 8 CD-R burners and 17,982 completed
unauthorized discs were seized. The Los Angeles High Tech
Crimes Task Force raided a CD-pressing facility and seized
17,000 finished discs; 2 sets of molds; and 38 burners. These
examples illustrate the widespread nature of this problem."
5)Prior Legislation :
a) AB 2750 (Krekorian), Chapter 468, Statutes of 2009,
requires a court to order persons convicted of specified
crimes relating to music piracy to pay restitution to
persons who have suffered economic loss as a result of the
illegal activity.
b) SB 1506 (Murray), Chapter 617, Statutes of 2005, created
a misdemeanor for any person to electronically disseminate
a copyrighted audiovisual work without disclosing their
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true name and address.
c) AB 1211(La Suer), of the 2001-02 Legislative Session,
would have required specified probation conditions for
those convicted of high-tech crimes accomplished with the
aid of a computer, electronic mail, or the Internet. AB
1211 was placed in the Assembly Committee on
Appropriations' Suspense File.
d) SB 438 (Johnston), Chapter 906, Statutes of 1998,
created the HTTAPP and provided for forfeiture of
telecommunications equipment after a conviction based on
misuse of the equipment.
REGISTERED SUPPORT / OPPOSITION :
Support
None
Opposition
None
Analysis Prepared by : Nicole J. Hanson / PUB. S. / (916)
319-3744