BILL ANALYSIS
SENATE COMMITTEE ON PUBLIC SAFETY
Senator Mark Leno, Chair A
2009-2010 Regular Session B
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AB 819 (Calderon)
As Amended June 1, 2009
Hearing date: July 7, 2009
Penal Code (URGENCY)
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INTELLECTUAL PROPERTY:
PIRACY PREVENTION
HISTORY
Source: Author
Prior Legislation: AB 2750 (Krekorian) - Ch. 468, Stats. 2009
AB 64 (Cohn) - Ch. 9, Stats. 2006
SB 1506 (Murray) - Ch. 617, Stats. 2005
SB 438 (Johnston) - Ch. 906, Stats. 1998
Support: Unknown
Opposition:None known
Assembly Floor Vote: Ayes 77 - Noes 0
KEY ISSUES
SUBJECT TO AN APPROPRIATION, SHOULD THE LEGISLATURE CREATE THE
INTELLECTUAL PROPERTY PIRACY PREVENTION AND PROSECUTION (IPPPP)
PROGRAM?
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SHOULD THE IPPPP PROGRAM MAKE GRANTS OF FUNDS TO LOCAL LAW
ENFORCEMENT AND PROSECUTORS, AND SHOULD AN ADVISORY BOARD BE
ESTABLISHED, AS SPECIFIED?
SHOULD MATTERS CONCERNING MUSIC, MOVIE, AND SOFTWARE PIRACY BE TAKEN
OUT OF THE PURVIEW OF THE HIGH TECHNOLOGY CRIME ADVISORY TASK FORCE
AND TRANSFERRED TO THE IPPPP?
PURPOSE
The purpose of this bill, subject to an appropriation of funds
by the Legislature, is to create the Intellectual Property
Piracy Prevention and Prosecution ("IPPPP") program, as
specified, to fund grants for local law enforcement in
prosecuting intellectual property crimes, and to establish an
IPPPP advisory committee, as specified.
Existing law states legislative intent to provide local law
enforcement and district attorneys with the tools necessary to
successfully interdict high technology crime. According to the
federal Law Enforcement Training Center, states will see a
tremendous growth in high technology 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. (Pen. Code
13848, subd. (a).)
Existing law 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,
including software piracy. (Pen. Code 13848, subd. (b)(5).)
Existing law establishes the High Technology Crime Advisory
Committee (HTCAC) to formulate comprehensive written strategy
for addressing high technology crime throughout California, with
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the exception of crimes that occur on state property or are
committed against state employees, and to advise the California
Emergency Management Agency (CalEMA) 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. Priorities include persons and groups 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. (Pen. Code 13848.6.)
Existing law requires the Director of CalEMA to appoint the
Chair and the following members to the HTCAC:
The California District Attorneys Association.
The California State Sheriffs Association.
The California Police Chiefs Association.
The Attorney General.
The California Highway Patrol.
The High Tech Criminal Investigators Association.
The representative of the agency of agencies
designated by the DOF Director.
The American Electronics Association to represent
computer system manufacturers.
The American Electronics Association to represent
software producers.
The California Cellular Carriers Association.
The California Internet Industry Alliance.
The Semiconductor Equipment and Materials
International.
The California Cable Television Association.
The Motion Pictures Association of America.
Either the California Telephone Association or the
California Association of Long Distance Companies.
The California banking industry.
The Office of Privacy Protection.
The Department of Finance. (Pen. Code 13848.6,
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subds. (c)-(d).)
Existing law 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. (Pen. Code 13848.6, subd. (e).)
This bill removes the creation and distribution of counterfeit
software, pirated sound recordings and audiovisual works from
the list of high technology crimes to be under the purview of
the High Technology Crime Advisory Committee (HTCAC).
This bill , dependent upon an appropriation of funds, establishes
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.
This bill places the IPPPP Program within the Department of
Justice (DOJ) and provides for grants to law enforcement and
district attorneys' offices. Upon appropriation by the
Legislature, all funds appropriated to the DOJ in this regard
shall be administered and disbursed by the Attorney General in
consultation with the IPPPP Advisory Committee as established.
This bill finds and declares the following:
A 2007 study by the Institute for Policy Innovation
found that intellectual property piracy - theft of movies,
music, software, and video games - costs the United States
economy $58 billion each year.
Intellectual property piracy is growing. 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. DVD sales have flattened in
recent years, while CD shipments to retailers have
plummeted.
Intellectual property piracy adversely affects the
California economy, eliminates jobs, and damages industry.
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According to the Business Software Alliance, in 2003,
software piracy 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 tax losses. This
act shows California's commitment to protect the
intellectual property created by California's innovation
and entertainment industries.
A technical advisory committee will allow California to
draw upon the expertise of those on the front lines of the
anti-piracy effort.
Grants awarded pursuant to this act will be used to
foster innovation and to provide local law enforcement and
prosecutors the effective anti-piracy tools.
Finally, by safeguarding the legitimate sale of
intellectual property, California will increase its tax
base, and stimulate the economy.
This bill 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.
This bill 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 Attorney General.
This bill requires the advisory committee to review grant
applications and, on a majority vote of the membership, submit
those applications to the AG for formal approval.
This bill states that the advisory committee shall monitor and
audit the use of grant funds.
This bill 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
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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.
This bill requires that, in order to receive a grant,
prospective recipients agree in writing to the following terms,
as conditions of receiving a grant:
The recipient is authorized to accept grant funds under
all applicable state and local laws;
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;
Grant funds shall be used to augment, but shall not be
used to supplant, a grant recipient's budget;
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;
The recipient shall notify the advisory committee in
writing of litigation or prosecution results, including any
settlement, judgment, or other resolution, within 30 days;
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
every 12 months thereafter until all disbursed funds have
been expended and reported on;
The recipient shall fully cooperate with the advisory
committee and its agents in providing all information and
documents concerning the use of grant funds;
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;
If grant funds are used for the production of any
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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;
and,
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.
This bill 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.
This bill requires the IPPPP Advisory Committee to identify
various priorities for law enforcement attention regarding the
following:
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:
o Movies;
o Music;
o Computer software; and,
o Video games.
The investigation and prosecution of violations of
criminal and civil provisions of law; and,
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.
This bill provides that the advisory committee shall consist of
10 members, of whom six shall be appointed by the Governor, two
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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
This bill directs the IPPPP Advisory Committee to meet at least
four times per year.
This bill provides that the advisory committee shall be composed
of the following members:
At least two representatives of the general public;
At least one representative each with demonstrable
knowledge of the following industries:
o The movie industry;
o The music industry;
o The computer software industry;
o The video gaming industry;
At least one representative with experience in law
enforcement, specifically relating to intellectual property
piracy offenses; and
At least one representative with experience prosecuting
intellectual property piracy offenses at the local, state,
or federal level.
This bill requires that in deciding which grant applications to
fund, the IPPPP Advisory Committee shall consider the following
factors:
The purpose for which the funds are sought;
The proposal's specificity, including whether the
proposal identifies anticipated costs, along with
materials and personnel to be used;
The anticipated public benefit;
The ability of the advisory committee to audit the
use of the funds; and
The number, amount, and use of previous grants
awarded to the prospective recipient, if any.
This bill entitles members of the IPPPP Advisory Committee to
the same immunity from liability that is provided to public
employees.
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This bill provides that this act shall become operative only if
an appropriation is provided for its operation.
RECEIVERSHIP/OVERCROWDING CRISIS AGGRAVATION IMPLICATIONS
California continues to face a severe prison overcrowding
crisis. The Department of Corrections and Rehabilitation (CDCR)
currently has about 170,000 inmates under its jurisdiction. Due
to a lack of traditional housing space available, the department
houses roughly 15,000 inmates in gyms and dayrooms.
California's prison population has increased by 125% (an average
of 4% annually) over the past 20 years, growing from 76,000
inmates to 171,000 inmates, far outpacing the state's population
growth rate for the age cohort with the highest risk of
incarceration.<1>
In December of 2006 plaintiffs in two federal lawsuits against
CDCR sought a court-ordered limit on the prison population
pursuant to the federal Prison Litigation Reform Act. On
February 9, 2009, the three-judge federal court panel issued a
tentative ruling that included the following conclusions with
respect to overcrowding:
No party contests that California's prisons are
overcrowded, however measured, and whether considered
in comparison to prisons in other states or jails
within this state. There are simply too many
prisoners for the existing capacity. The Governor,
the principal defendant, declared a state of emergency
in 2006 because of the "severe overcrowding" in
----------------------
<1> "Between 1987 and 2007, California's population of ages 15
through 44 - the age cohort with the highest risk for
incarceration - grew by an average of less than 1% annually,
which is a pace much slower than the growth in prison
admissions." (2009-2010 Budget Analysis Series, Judicial and
Criminal Justice, Legislative Analyst's Office (January 30,
2009).)
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California's prisons, which has caused "substantial
risk to the health and safety of the men and women who
work inside these prisons and the inmates housed in
them." . . . A state appellate court upheld the
Governor's proclamation, holding that the evidence
supported the existence of conditions of "extreme
peril to the safety of persons and property."
(citation omitted) The Governor's declaration of the
state of emergency remains in effect to this day.
. . . the evidence is compelling that there is no
relief other than a prisoner release order that will
remedy the unconstitutional prison conditions.
. . .
Although the evidence may be less than perfectly
clear, it appears to the Court that in order to
alleviate the constitutional violations California's
inmate population must be reduced to at most 120% to
145% of design capacity, with some institutions or
clinical programs at or below 100%. We caution the
parties, however, that these are not firm figures and
that the Court reserves the right - until its final
ruling - to determine that a higher or lower figure is
appropriate in general or in particular types of
facilities.
. . .Under the PLRA, any prisoner release order that
we issue will be narrowly drawn, extend no further
than necessary to correct the violation of
constitutional rights, and be the least intrusive
means necessary to correct the violation of those
rights. For this reason, it is our present intention
to adopt an order requiring the State to develop a
plan to reduce the prison population to 120% or 145%
of the prison's design capacity (or somewhere in
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between) within a period of two or three years.<2>
The final outcome of the panel's tentative decision, as well as
any appeal that may be in response to the panel's final
decision, is unknown at the time of this writing.
This bill does not appear to aggravate the prison overcrowding
crisis outlined above.
COMMENTS
1. Need for This Bill
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
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<2> Three Judge Court Tentative Ruling, Coleman v.
Schwarzenegger, Plata v. Schwarzenegger, in the United States
District Courts for the Eastern District of California and the
Northern District of California United States District Court
composed of three judges pursuant to Section 2284, Title 28
United States Code (Feb. 9, 2009).
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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.
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. LAO's 2008-2009 Budget Analysis: High Technology Theft
Apprehension and Prosecution Program - the Precursor or
Model of the Program Created by this Bill
The Legislative Analyst's Office (LAO) reviewed the High
Technology Theft Apprehension and Prosecution Program
(HTTAP) as part of the review of the 2008-2009 Budget. The
HTTAP appears to be the model for the program that would be
created by this bill. The LAO's analysis stated:
Background. High technology crimes are defined as
being those crimes in which technology is used as an
instrument in committing a crime, or in which
technology is the target of a crime (examples include
computer hacking and intellectual property theft).
Historically, the High Technology Theft Apprehension
and Prosecution Program provided about $10 million
from the General Fund to support five local high
technology crime task forces, and two related database
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and training projects.
In 2001, the Legislature expanded the program to
include five regional identity theft units that focus
solely on identity theft crimes. As a result, funding
for the program increased to $13.3 million from the
General Fund. Under the program, equal grant
allocations go to high technology task forces in
Marin, Los Angeles, Sacramento, San Diego, and Santa
Clara Counties (each task force gets about $2.5
million), with additional resources allocated to DOJ
and the California District Attorneys Association to
maintain a crime database and to provide training. The
General Fund portion of program funding has a 25
percent local government match, bringing total program
funds to $16.6 million.
Administration's Proposal. The administration's
budget proposes a 10 percent reduction in funding for
this program in the budget year (for a General Fund
reduction of $1.3 million). The result would be
approximately $12 million of continued General Fund
support for the program, for total program funding of
at least about $15 million when the local matching
funds requirement is taken into account.
$10 Million in Spending Focused on 1,500 Victims. In
2006-07, the program's high technology task forces
investigated about 1,000 crimes involving about 1,500
victims at a General Fund cost of $10 million. This
means that on average, the state spent more than
$10,000 per investigation, or $6,800 per victim on
these types of crimes. The identity theft task forces,
which were funded with $3.3 million of General Fund
support, investigated about 1,400 cases statewide
which involved nearly 17,000 victims of identity
theft. This means that on average, the state spent
more than $2,300 per identity theft investigation, or
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about $200 per victim.
LAO Recommendation. As a result of the high cost to
the state of investigating each case, and to better
target funding in this program, we recommend that the
Legislature reduce total General Fund support to this
program by 25 percent ($3.3 million General Fund) by
reducing the funding provided for high-tech theft
cases. Our recommendation would hold harmless the
amount of existing funding to identity theft units and
to DOJ for the crimes database. This would result in
approximately $10 million General Fund support for the
program ($3.3 million for identity theft units, $6.7
million for other high-tech crimes units, and $60,000
to DOJ for crimes database).
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3. Recent Music and Movie Piracy Legislation - Piracy
Investigations by Industry Representatives
The Legislature has enacted a number of movie and music
piracy bills over the past five years.
AB 64 (Cohn), Ch. 9, Stats. 2006 expanded the
felony in the true name and address music piracy law.
California can make no direct copyright infringement
statutes, as federal law preempts state law in this
regard. Instead, California law makes is a crime to
fail to disclose the true name and address of the
maker of a sound recording. Music and movie pirates
are unlikely to include their true name and address on
pirated CDs. DVDs and other recordings and audiovisual
works.
SB 1506 (Murray) Ch. 617, Stats. 2004 essentially
extended the true name and address law for hard-copy
musical or audiovisual works to electronic
distribution through Internet file sharing.
SB 1032(Murray) Ch. 670, Stats. 2003 defined the
misdemeanor crime of recording a motion picture in a
theatre without the express permission of the owner of
the theatre. The illicit recording of movies in
theatrical release was the subject of a well-known
"Seinfeld" episode - "The Little Kicks."
AB 2750 (Krekorian) Ch. 468, Stats. 2008, provided
that in a music or movie piracy prosecutions, the
court can order the defendant to pay restitution to a
trade association (such as the Recording Industry
Association of America - RIAA), if the trade
association suffered economic loss from the
defendant's crime. AB 2750 specifically provided that
restitution includes the reasonable costs incurred by
the owner, producer or trade association to
investigate the piracy.
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In discussions on each of these bills, industry representatives
noted that the music and movie industries make substantial
efforts to investigate piracy under existing laws. The trade
associations employ investigators - often former law enforcement
officers - to investigate music and movie piracy. The trade
associations also employ attorneys - often former prosecutors -
to organize and prepare the evidence that would be used in
prosecution. The cases are then essentially turned over to
local law enforcement agencies and district attorneys for
prosecution. Also, especially in music piracy cases, trade
associations have sued persons who have downloaded or
electronically distributed pirated music. Trade association
lawyers vigorously pursue restitution claims following music or
movie piracy convictions.
The music and movie industries have direct and substantial
financial interests in preventing piracy, punishing piracy and
obtaining restitution from those who illegally obtain or
distribute music and movies. Arguably, a government-sponsored
piracy advisory organization and a program to fund piracy
investigations by law enforcement could be redundant of industry
efforts.
WOULD THE PROGRAM CREATED BY THIS BILL DUPLICATE CURRENT EFFORTS
AND ACTIVITIES OF MOVIE INDUSTRY COMPANIES AND TRADE
ASSOCIATIONS TO INVESTIGATE AND COUNTER PIRACY?
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