BILL ANALYSIS �
SB 1479
Page 1
Date of Hearing: June 26, 2012
Counsel: Sandy Uribe
ASSEMBLY COMMITTEE ON PUBLIC SAFETY
Tom Ammiano, Chair
SB 1479 (Pavley) - As Amended: March 29, 2012
SUMMARY : Provides that in music or video piracy cases,
restitution shall include the value of pirated works that were
seized from the defendant, but not actually sold. Specifically,
this bill :
1)Specifies that for purposes of restitution involving crimes of
music and video piracy, the possession of non-conforming
devices or articles intended for sale constitutes actual
economic loss to an owner or lawful producer in the form of
displaced legitimate wholesale purchases.
2)Requires a restitution order in music and video piracy cases
to be based on the value of legitimate copies of the works
illegally possessed by the defendant had that number of works
been legitimately purchased at the wholesale price.
EXISTING LAW :
1)States it is the unequivocal intention of the People of the
State of California that all persons who suffer losses as a
result of criminal activity shall have the right to
restitution from the persons convicted of the crimes for
losses they suffer. Restitution shall be ordered from the
convicted persons in every case, regardless of the sentence or
disposition imposed, in which a crime victim suffers a loss,
unless compelling and extraordinary reasons exist to the
contrary. �Cal. Const., Art. I, sec. 28(b).]
2)Requires full victim restitution for economic losses
determined by the court. �Penal Code Section 1202.4(f).]
3)States that economic losses include, but are not limited to,
the following: full or partial payment for the value of
stolen or damaged property; medical expenses; mental health
counseling expenses; wages or profits lost due to injury
SB 1479
Page 2
incurred by the victim, and if the victim is a minor, wages or
profits lost by the minor's parent, parents, guardian, or
guardians, while caring for the injured minor; wages or
profits lost by the victim, and if the victim is a minor,
wages or profits lost by the minor's parent, parents,
guardian, or guardians, due to time spent as a witness or in
assisting the police or prosecution; noneconomic losses,
including, but not limited to, psychological harm, for felony
violations of Section 288; interest at the rate of 10 percent
per annum; actual and reasonable attorney's fees and other
collection costs; relocation expenses incurred by an adult
victim; expenses to install or increase residential security;
expenses to retrofit a residence or vehicle, or both, to make
the residence accessible to or the vehicle operational by the
victim, where the victim suffers permanent disability as a
direct result of the crime; and expenses to monitor and repair
the credit report of a victim of identity theft. �Penal Code
Section 1202.4(f).]
4)Defines a "victim", for purposes of restitution, as including
any of the following:
a) The immediate surviving family of the actual victim;
b) Any corporation, business trust, estate, trust,
partnership, association, joint venture, government,
governmental subdivision, agency, or instrumentality, or
any other legal or commercial entity when that entity is a
direct victim of a crime; and
c) Any person who has sustained economic loss as the result
of a crime and who satisfies any of the following
conditions:
i) At the time of the crime was the parent,
grandparent, sibling, spouse, child, or grandchild of the
victim;
ii) At the time of the crime was living in the household
of the victim;
iii) At the time of the crime was a person who had
previously lived in the household of the victim for a
period of not less than two years in a relationship
substantially similar to a relationship listed above;
SB 1479
Page 3
iv) Is another family member of the victim, including,
but not limited to, the victim's fianc� or fianc�e, and
who witnessed the crime; or
v) Is the primary caretaker of a minor victim. �Penal
Code Section 1202.4(k).]
5)Provides that a person is guilty of a crime when he or she
knowingly attempts to sell, rent or manufacture, or possess
for these purposes, an illicit audio recording or audiovisual
work. The essence of this crime is that the defendant failed
to disclose the true name and address of the manufacturer and
the name of the artist. The crime is punishable as follows:
a) A violation involving at least 100 copies of an audio
recording or an audiovisual work is an alternative
felony-misdemeanor, punishable by imprisonment for up to
one year in the county jail, or in state prison for 2, 3,
or 5 years, or a fine of up to $500,000, or both.
b) A first violation involving less than 100 copies is a
misdemeanor, punishable by up to one year in county jail,
or a fine not exceeding $50,000, or both.
c) A subsequent violation involving less than 100 copies is
an alternative felony-misdemeanor, punishable by up to one
year in county jail, 16 months, 2 years, or 3 years in
state prison, or a fine not exceeding $200,000, or both.
(Penal Code Section 653w.)
6)Prohibits transferring any recording for purposes of sale
or financial gain, or transporting such recordings for
financial gain. �Penal Code Section 653h(a).] An
offense involving at least 1000 units is an alternate
felony-misdemeanor, with a county jail term of 2, 3 or 5
years and fine of up to $500,000. An offense involving
less than 1000 units is a misdemeanor with a fine of up
to $50,000. A second conviction for fewer than 1000
units is a straight felony, with a maximum fine of
$200,000. �Penal Code Section 653h(b) and (c).]
7)Prohibits selling or offering for sale, etc. illegally
transferred recordings. A first offense involving at least
100 units is a misdemeanor, with maximum one-year jail term
SB 1479
Page 4
and maximum $20,000 fine. A second conviction is an alternate
felony- misdemeanor, with maximum $50,000 fine. A first
offense involving less than 100 units is a misdemeanor, with
maximum 6-months' jail term and a maximum fine of $10,000. A
second offense involving less than 100 units is a misdemeanor,
with maximum one-year jail term and maximum $20,000 fine. A
third offense involving less than 100 units is an alternate
felony-misdemeanor, with maximum $25,000 fine. �Penal Code
Section 653h(d).]
8)Prohibits the unauthorized recording of live performances for
purposes of sale or financial gain. An offense involving at
least 1000 units is an alternate felony-misdemeanor, with a
county jail term of 2, 3 or 5 years and fine of up to
$500,000. An offense involving less than 1000 units is a
misdemeanor with a fine of up to $50,000. A second conviction
for fewer than 1000 units is a straight felony, with a maximum
fine of $200,000. (Penal Code Section 653u.)
9)Prohibits transporting unauthorized recording of live
performances for financial gain. An offense involving at
least 1000 units is an alternate felony-misdemeanor, with a
county jail term of 2, 3 or 5 years and fine of up to
$500,000. An offense involving less than 1000 units is a
misdemeanor with a fine of up to $50,000. A second conviction
for fewer than 1000 units is a straight felony, with a maximum
fine of $200,000. (Penal Code Section 653s.)
10)States that a person who violates a disc manufacturing
statute, as specified, is guilty of a misdemeanor, punishable
by a fine of between $500 and $25,000 for a first offense. A
subsequent offense is punishable by a fine of between $5,000
and $250,000. (Business and Professions Code Section 21804.)
11)States that any person who buys, sells, receives, transfers,
or possess for purposes of sale or rental an optical disc
knowing that the disc was manufactured in California without
the required identification mark, or with a false mark, is
guilty of a misdemeanor, punishable by imprisonment in county
jail for up to a year, a fine of up to $10,000, or both.
(Business and Professions Code Section 21805.)
12)Makes it is a misdemeanor to knowingly remove, deface, cover,
alter or destroy the required identification mark on an
optical disc. The crime is punishable by a jail term of up to
SB 1479
Page 5
one year, a fine of up to $10,000, or both. (Business and
Professions Code Section 21806.)
13)Makes it a crime for any person to willfully manufacture,
intentionally sell, or knowingly possess for sale any
counterfeit mark, punishable as follows:
a) When the offense involves less than 1,000 articles, with
a total retail or fair market value less than that required
for grand theft, and if the defendant is an individual, the
crime is punished by a fine of not more than $10,000, or by
imprisonment in county jail of up to one year, or by both.
If the defendant is a business entity, the maximum fine is
$200,000.
b) When the offense involves 1,000 or more of the articles,
or has a total retail or fair market value equal to or
greater than that required for grand theft, and if the
defendant is an individual, the crime is punished as an
alternate felony misdemeanor, or a fine not to exceed
$500,000, or by both; or, if the defendant is a business
entity, by a fine not to exceed $1,000,000.
c) For a subsequent conviction if the defendant is an
individual, are punished as an alternate felony
misdemeanor, or by a fine of not more than $100,000, or
both that fine and imprisonment. For a subsequent
conviction of a business entity, the crime is punished by a
fine of not more than $400,000. (Penal Code Section 350.)
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's Statement : According to the author, "SB 1479 seeks
to provide a clear standard for restitution in cases involving
pirated music and movies. We need adequate deterrents to
combat this growing epidemic.
"SB1479 strengthens our piracy laws by making it clear that
restitution is appropriate in cases involving the possession
of fraudulent recordings intended for sale. The bill also
provides clarification to the courts on how restitution is
calculated.
SB 1479
Page 6
"In 2011, more than 600,000 illegal CDs and DVDs were seized in
California. In 2007, the LA Economic Development Corporations
cited that the music industry lost $851 million due to
counterfeiting, while the movie industry lost over $2 billion.
State and local governments also lost significant revenue
because of lost sales.
"The actions of media pirates are decimating what have long been
California-based, treasured industries. We need adequate
deterrents to reflect the severity of the crime."
2)People v. Garcia (2011) 194 Cal.App.4th 612 : According to the
background sheet provided by the author's office, the impetus
for this bill is the case of People v. Garcia. In Garcia,
appellants were convicted of failure to disclose the origin of
recording or audiovisual work (Penal Code Section 653w) and
the manufacture or sale of a counterfeit mark �Penal Code
Section 350(a)(1)]. One of the defendants was found in
possession of a large number of DVDs of recent films, and he
told police officers he intended to sell them. In the
defendants' apartment, officers found equipment for the
manufacture and packaging of DVDs and CDs, pay-owe records
with notations for approximately 4,000 CDs, over 10,000
pirated DVDs, and nearly 4,000 counterfeit music CDs. (Id.
at p. 614.) The trial court ordered appellants to pay
$235,072.68 in restitution under Penal Code Section 1202.4(r),
with a portion going to the Motion Picture Association of
America and a portion to the Recording Association of America.
The award was comprised of the value of both the seized items
and the items in the pay-owe sheets. (Id. at p. 616.)
The Court of Appeal modified the restitution order, holding that
restitution under Penal Code Section 1202.4(r) is limited to
economic loss and does not envision an award for potential
economic loss to punish the offender. Under rules of
statutory construction, the court determined that the
legislative intent for Penal Code Section 1202.4(r) was to
recompense a victim's economic loss rather than to punish
offenders commensurate with the size of their inventory. (Id.
at p. 621.) The Senate Committee analysis noted that
"'�a]rguably, allowing restitution for potential lost sales,
as measured by the number of illicit items the defendant
possessed for sale, does not compensate the victim for a true
loss. Such payments would appear to be simply punitive.
SB 1479
Page 7
Assuming that restitution, in addition to compensating the
victim and rehabilitating the defendant, can serve a partly
punitive purpose through ensuring that amends are made to
society, the significant prison terms and a fine of up to
$925,000 would appear to provide more than adequate
punishment.'" (Ibid.) The analysis suggested amendments in
order to eliminate restitution "corresponding to the number of
nonconforming devices or articles involved in the violation."
(Sen. Com. Rep., com. 9, pp. S-U; Assem. Bill No. 2750, as
amended in Sen. June 30, 2008.) The amendments were intended
to preclude the interpretation that a victim of piracy was
entitled to compensation for potential lost sales, and the
suggestions were adopted. (Ibid.)
Accordingly, the court found the restitution award comprising
both economic loss and potential economic loss was error. The
court modified the order to reflect only the economic loss,
thereby reducing the award to $87,113.20 which reflected the
victims' actual economic loss. (Id. at p. 622.)
3)Limitations on Victim Restitution : "In a criminal case an
award of restitution is committed to the sound discretion of
the trial court." �People v. Giordano (2007) 42 Cal.4th 644,
665.] The trial court is given almost unlimited discretion as
to the kind of information it can consider and the sources
where it comes from. �People v. Hove (1999) 76 Cal.App.4th
1266, 1275.] Likewise, the trial court is entitled to use any
rational method of fixing the amount of restitution. �People
v. Goulart (1990) 224 Cal.App.3d 71, 83.]
While statutory provisions for victim restitution have been
broadly and liberally construed, the amount of restitution
must be limited to losses actually incurred as a result of the
defendant's criminal conduct. �People v. Lyon (1996) 49
Cal.App.4th 1521, 1526.] Although full restitution in the
amount of the losses resulting from appellant's criminal
conduct is required �Penal Code Section 1202.4(f)(3)], the
victim is not entitled to overcompensation. "A restitution
order is intended to compensate the victim for its actual loss
and is not intended to provide the victim with a windfall."
�People v. Chappelone (2010) 183 Cal.App.4th 1159, 1172; In re
Anthony M. (2007) 156 Cal.App.4th 1010, 1017-1018; People v.
Fortune (2005) 129 Cal.App.4th 790, 795; People v. Thygesen
(1999) 69 Cal.App.4th 988, 995.] "A direct restitution award
in excess of the victim's loss is unauthorized." �People v.
SB 1479
Page 8
Nguyen (1994) 23 Cal.App.4th 32, 45; People v. Williams (1989)
207 Cal. App. 3d 1520, 1524.]
As interpreted by the courts, the term "economic losses" in the
restitution statute consistently has referred to actual
economic losses. People v. Garcia is not the first case to
come to this conclusion. For example, in People v. Ortiz
(1997) 53 Cal.App.4th 791, 798-799, the Court of Appeal upheld
an order rejecting the potential-loss theory of recovery as to
counterfeit tapes that were recovered before they could be
sold. The court limited recovery to losses for actual tapes
sold. In People v. Thygesen, supra, 69 Cal.App.4th at p. 995
the appellate court reversed a restitution order where the the
trial court made an award based on the speculative proposition
that the victim's stolen cement mixer would have been rented
out every week for 13 months. And, in People v. Chappelone
(2010) 183 Cal.App.4th 1159, 1180-1182, the Court of Appeal
held that the trial court erred when it calculated restitution
for stolen damaged goods based on the retail value of the
items rather than their devalued worth.
This bill, by contrast, applies economic loss to purely
hypothetical losses. The number of pirated works in the
defendant's possession and seized from him or her do not
represent sales lost by the copyright holder because they have
not displaced actual sales. Rather, the number of items
seized establishes the nature and extent of the crime. Under
the pertinent piracy statutes, the number of units determines
the potential length of incarceration and the maximum fine.
Admittedly, in some cases it may be difficult to calculate
actual loss based on the number of pirated items sold because
illegal manufacturing and distributing may not keep accurate
records of sales. "Nevertheless, courts are often confronted
with restitution situations that require 'complicated
calculations.' �Giordano, supra, 42 Cal.4th at p. 661
(calculation of spouse's loss of support); . . . People v.
Baker, supra, 126 Cal.App.4th at p. 465 (calculating
restitution for the theft of cattle, including whether it was
appropriate to order restitution for calves that were likely
born while the cows were misappropriated).] This complexity
of calculation, however, does not absolve the court from
awarding restitution in a rational manner that is reasonably
related to the victim's loss." �People v. Chappelone, supra,
183 Cal. App. 4th 1159, 1175 (rejecting prosecution argument
SB 1479
Page 9
that it would have been "virtually impossible" to accurately
calculate the value of the damaged merchandise stolen from
Target.).] Moreover, there are other ways by which to
determine actual lost sales in these types of cases. For
example, in People v. Ortiz, supra, 53 Cal.App.4th 791, the
court calculated lost sales not only based on the number of
items sold to undercover investigators, but also based on the
amount of money hidden in defendant's dresser drawer, price
lists, and the value placed on the items by the non-profit
trade association. (Id. at p. 799.)
4)Economic Harms from Piracy : In 2007, the Los Angeles County
Economic Development Corporation (LAEDC) published a report on
the economic harms of piracy on Los Angeles County. (A False
Bargain: The Los Angeles County Economic Consequences of
Counterfeit Products, February 2007.) According to the
report, "Global piracy disproportionately hurts Los Angeles
because so many of the firms that make the originals are
concentrated here. Hollywood movie studios, for example, lose
out whether a copied DVD is sold in Los Angeles, Dallas,
Athens or Shanghai. The LAEDC estimates that firms making
products prone to counterfeiting in nine at-risk sectors
suffered combined losses of $5.2 billion in 2005. Motion
picture production accounted for the largest share of the
losses ($2.7 billion); followed by sound recording ($851
million); apparel, accessories, and footwear ($617 million);
and software publishing ($355 million). These figures
represent the losses to firms based in Los Angeles, without
specifying where the piracy takes place."
Although it appears that the recording industry is hardest hit
by the production and sales of counterfeit goods, it is
unclear whether this is a sufficient reason to treat that
industry any differently than other industries affected by of
counterfeit goods, such as the garment industry, software
publishing, or drug manufacturers.
5)Argument in Support : According to the Recording Industry
Association of America (the sponsor of this bill), "Though
California has criminal laws designed to protect the
entertainment industry and the general public against the sale
of unlawful music and movies, the applicable restitution
provision had been interpreted by state courts in a manner
that enables guilty parties to avoid their obligation to
properly compensate the victims of the crime for their losses.
SB 1479
Page 10
According sec. 1202.4(r) must be amended to clarify that the
possession of unlawful music and movie product intended for
sale constitutes an actual economic loss to the owner by
virtue of displaced legitimate wholesale purchases, thereby
requiring the defendant to pay restitution to the victims that
have sustained the loss.
"SB 1479 will:
a) "Strengthen the piracy laws of California by making
clear that restitution is appropriate in cases involving
the possession of fraudulent recordings intended for sale
and must be awarded to the victims of the crime.
b) "Promote judicial economy and consistency by providing
judges with clear guidelines on how to calculate
restitution awards in music piracy cases."
6)Argument in Opposition : According to the California Attorneys
for Criminal Justice , "SB 1479 is born out of a real economic
crisis in the recording and motion picture industry. CACJ
recognizes the financial distress faced by the industry as a
result of such dynamics. Nonetheless, CACJ must analyze the
justification for this bill through a narrow prism; whether
restitution should be authorized without having to provide
evidence of economic loss. Unfortunately, SB 1479 pushes the
legal envelope too far.
"This proposal seeks to recover a 'restitution' financial amount
that is not directly tied to an economic loss. This is
accomplished by redefining economic loss to cover mere
possession of pirated material. Under the provisions of SB
1479, an amount of money would have to be paid by the
defendant equivalent to losses that have not been proven. For
example, if pirated material was created but never held out
for sale in any way. In this scenario, there are no displaced
'sales.'
"Additionally, the legislation appears to rely on an argument
that the person in possession of the unauthorized material
caused a 'loss' because had that person not pirated the
material, he or she would have made a wholesale purchase.
This is the argument made before the Garcia court.
Unfortunately, the court rightfully rejected this argument.
SB 1479
Page 11
"Without any evidence to the contrary, it is difficult to
imagine that a person who pirates material causes a direct
economic loss, if he or she never attempted to sell the
material, nor would have otherwise made a lawful wholesale
purchase. Again, SB 1479 wants to make this assumption and
not require any evidence as justification for this argument.
CACJ recognizes that restitution must remain narrow; a victim
shall be made 'whole' based on direct losses that are
supported by the evidence put before the court. SB 1479
eliminates the requirement to actually prove the losses.
Restitution is significantly different legal concept than
'damages' which is used in civil court. It appears that the
arguments made in favor of SB 1479 are more compelling in a
civil court context.
"If SB 1479 is adopted, it would establish a dangerous
precedent. We would anticipate other types of victims asking
for 'restitution' without having to provide evidence of these
losses."
7)Related Legislation : SB 550 (Padilla), Chapter 421, Statutes
of 2011, authorized law enforcement officers to perform
inspections of commercial optical disc manufacturers to verify
compliance with optical disc identification law, as specified,
without providing prior notice of the inspection, or obtaining
a warrant, and also increases applicable fines for illegally
manufacturing forged discs.
8)Prior Legislation :
a) AB 819 (Calderon), Chapter 351, Statutes of 2010,
increased the fines for intellectual property piracy.
b) AB 568 (Lieu), Chapter 453, Statutes of 2009, allowed
law enforcement to declare any non-residential property
unlawfully used for the manufacture, sale, or knowing
possession of counterfeit goods, a nuisance and authorized
various public and private remedies, including injunctions
and abatement orders to abate and prevent the nuisance.
c) AB 2750 (Krekorian), Chapter 468, Statutes of 2008,
required a court to order persons convicted of specified
crimes relating to music piracy to pay restitution to not
only the owner or lawful producer, but also to a trade
association acting on behalf of the owner or lawful
SB 1479
Page 12
producer.
d) AB 64 (Cohn), Chapter 9, Statutes of 2006, made the
possession or sale of at least 100, rather than 1,000,
audio recordings punishable as an alternate
felony/misdemeanor.
REGISTERED SUPPORT / OPPOSITION :
Support
Recording Industry Association of America (Sponsor)
Los Angeles Area Chamber of Commerce
Los Angeles Council Member Paul Krekorian
Los Angeles County Business Federation
Los Angeles District Attorney's Office
Motion Picture Association of America
Sony Music Entertainment
Valley Industry and Commerce Association
Opposition
California Attorneys for Criminal Justice
California Public Defenders Association
Analysis Prepared by : Sandy Uribe / PUB. S. / (916) 319-3744