Copyright Piracy and The NET Act of 1997

Although United States copyright laws originally contained no criminal
liability provisions, the 1897 revision to the Copyright Act made it a
misdemeanor to unlawfully perform dramatic or musical works for profit. In
later revisions, additional sections were added for the infringement of other
types of copyrightable works. Although leaving unchanged the one-year
imprisonment penalty established in 1897, the Copyright Act of 1976 increased
the monetary penalty for copyright infringement from $1,000 to $10,000.
Infringement of musical recording and motion pictures was subject to a penalty
of $25,000, and repeat offenders could be fined $50,000.

Following the enactment of the 1976 Amendment, it became
apparent that the criminal sanctions for copyright
law were completely ineffective against large-scale piracy operations, in part
this was attributed to the fact that the Justice Department admittedly was
unwilling to expend its resources to obtain misdemeanor convictions of
copyright infringers. Accordingly, the music recording and motion picture
industries convinced Congress to provide felony liability for large-scale
copyright infringement, specifically illegal copying of more than 1,000 copies of sound
recordings or 65 copies of motion pictures over a 180-day period carries a
penalty of up to five years in prison and a $250,000 fine. As in the past, to
be criminally liable an infringer was required to act willfully and for
commercial advantage or private financial gain.

With the advent of personal computing and the widespread distribution of computers, the copyright landscape continued to change in the 1980s and 1990s. Further facilitating the unauthorized distribution of copyrighted material was that virtually every type of copyrightable work could be digitized–translated into a series of 1’s and 0’s–and could thus be readily copied and transmitted over wire connections. When processed by a computer, these digitized versions resulted in a perfect copy of the original work. In addition, computer software became as desirable a target for piracy as were music and movies. In response to the concerns of the computer software industry, Congress enacted the Copyright Felony Act in 1992, which applied felony liability for large-scale infringement of sound recordings and motion pictures not only to computer software but to all copyrighted works. The Copyright Felony Act also increased felony sanctions and lowered the thresholds for determining what constituted infringement.

After Congress seemed to have covered all the bases regarding large-scale piracy of copyrighted works with the Copyright Felony Act, a student at the Massachusetts Institute of Technology (MIT), operating what might be regarded as a forerunner of Napster and similar music-sharing systems, invited licensees of software products to upload copies of their software onto his electronic bulletin board and invited others to download it. Because the student derived no profit whatever from this activity, he could not be prosecuted under the criminal provisions of the copyright law and, therefore, was prosecuted for wire fraud. A federal district court, however, ruled that the government could not prosecute the student for wire fraud because a copyright was not an ordinary form of property and, thus, interference with a copyright could not be classified as fraud. Moreover, although the conduct constituted a civil violation of copyright law, the court was unwilling to allow a criminal prosecution under the wire fraud statute when the conduct was not a criminal violation of the copyright law.

The aftermath of the MIT student case was the enactment of the No Electronic Theft Act (NET) of 1997, which according to at least one legislator was intended to “plug the loophole” in copyright law made evident by the case. NET modifies the definition of “financial gain” in the Copyright Act to include the receipt or expected receipt of other copyrighted works. In addition, “financial gain” is not a prerequisite to criminal liability, as long as the infringing conduct is willful and the threshold quantity of copying for criminal liability is reached or exceeded. NET also extends the statute of limitations for prosecuting a violation of the Copyright Act to five years, whereas the statute of limitations for civil actions remains at three years. NET also specifically allows victim impact statements to be presented at sentencing in which the scope of economic loss to the victim from the acts of copyright infringement can be described.

NET is understandably popular with the motion picture, music recording and computer software industries but has had its share of critics as well. Those critics point out that, while copyright owners have a legitimate right to protect their interests in their copyrighted works, the provision in the United States Constitution that provides the basis for copyright law states as its objective the promotion of the progress of science and the useful arts and not the rewarding of the labors of the creators of works. Concern has been expressed that, without the requirement of financial gain to find criminal liability, NET will criminalize fair use and other legitimate uses of copyrighted works that facilitate the educational process and the open exchange of information.

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