Internet Copyright Infringement & The No Electronic Theft Act (the "NET" Act)
Explained by our California Criminal Defense Lawyers

Millions of people in California and elsewhere use the internet to learn about, discuss, sample, and buy their favorite movies, music, books, video games...you name it. But if they're not careful, fans of these sorts of media may find themselves committing the serious federal crime of internet copyright infringement.

"Copyright" refers to the right to copy and display, distribute, or sell a creative work (like a painting, movie, song, video game, novel...and even computer software). 1 The copyright in any creative work is first owned by the person who creates it (like the artist or writer).  2

But the copyright can also be sold or given away by that person.  3 (For example, a musician may agree to sell the copyright to a song they have recorded to a record company.) The owner of a copyright can also give other people temporary permission to use, sell, display, or give away the work.

Sometimes known as "piracy," the crime of internet copyright infringement basically consists of copying, uploading, or sharing a creative work without the permission of the copyright owner.  4

This crime instantly became much more common in 1997, when Congress passed the No Electronic Theft Act (also known as the "NET" Act).  5 The NET Act made it a crime to share computer files containing copyrighted songs, movies, etc. with your friends or with strangers through the internet 6...something many people have done without having any idea they were committing a federal crime!

In this article, our experienced California and federal criminal defense attorneys 7 explain the federal crime of internet copyright infringement (or "piracy") in California by addressing the following:

1. The No Electronic Theft (NET) Act
2. Forms of internet copyright infringement
(online piracy)

2.1. Infringing copyright for profit

2.2. Reproducing or distributing copyrighted works worth more
than $1,000.

2.3. Distributing a work being prepared for distribution

3. Federal criminal penalties for internet
copyright infringement
4. Examples of federal prosecutions for copyright infringement
5. Related offenses: Internet fraud

If you would like more information after reading this article, we invite you to contact us at Shouse Law Group.

You may also find helpful information in our related articles on Federal Crime Defense Lawyers; Southern California White Collar Crime Defense Lawyers; Internet Fraud & California Law; and California's Criminal Fraud Laws Explained by Defense Attorneys.

1. The No Electronic Theft (NET) Act

The No Electronic Theft ("NET") Act of 1997 completely changed the landscape of criminal penalties for violations of the federal copyright law.

Before the NET Act, it was only a crime to violate someone else's copyright (by copying, distributing, selling, etc., a creative work without permission) if you were doing so in order to make money.  8

This made sense in the days when it cost money to copy creative works like music albums and movies. After all, you used to have to invest in a blank videocassette to make a copy of a movie, or paper and a printer to make a copy of a book. But with the invention of the Internet and digital files for music, movies, etc., suddenly it became possible to make thousands of copies of a song for free. This meant that people could share those copies without charging for them...and so might actually start to do so.

Img-copyright-ipod

The NET Act was specifically a response to this kind of problem. A 21-year-old college student at the world-famous Massachusetts Institute of Technology ran an online bulletin board where people could upload and download software and video games for free (without permission from the copyright owners). He operated the bulletin board for fun and didn't earn any money from it.  9

The student was charged with the federal crime of copyright infringement, but he couldn't be convicted because he wasn't running the bulletin board for profit. So charges against him were dismissed.  10

Not long after that, in 1997, the United States Congress passed the NET Act. This law made it a federal crime to infringe copyright in some circumstances even if the person doing the infringing did not make money, or intend to make money, by doing so.  11

Many people think the NET Act goes too far...that it's too broad and too vague and that it's designed to benefit the large companies that produce music, movies, and software instead of the general public.  12

2. Forms of internet copyright infringement
(online piracy)

Luckily, it's not the case that everyone who's ever downloaded music for free is guilty of the federal crime of online copyright piracy.

There are three ways a person can commit the crime of copyright infringement. These are:

2.1. Infringing copyright for profit

One way to commit criminal copyright violations is to infringe someone else's copyright for purposes of your own "commercial advantage or private financial gain" (that is, to help your own business or to make money).  13 As we just discussed, this was a crime even before the NET Act was passed in 1997.

Example: Nelson owns several stores that offer video rentals and sales. In the basement of one of those stores, he has machines for making large numbers of copies of DVDs and videocassettes. After buying a single copy of a DVD from the production company, he will make multiple copies of it without permission and will rent or sell these.

Nelson is violating the copyright on these movies and is doing it to make a profit (through his rental and sales business). He would be guilty of the crime of copyright infringement for private financial gain.  14

2.2. Reproducing or distributing copyrighted works worth more than $1,000

Thanks to the NET Act, you can now also be convicted of copyright piracy even if you weren't trying to make a profit. For a conviction under this new law, the prosecutor has to show both of the following:

  1. You copied or shared a copyrighted work willfully (meaning that you did it intentionally...not by accident),  15 AND
  2. the total retail value of the work or works adds up to more than one thousand dollars ($1,000) in any period of six (6) months.  16
Example: Leo buys an album he likes on the Internet, in the form of an MP3 file. It costs him twelve dollars ($12). When his girlfriend mentions that she likes the album too, he uploads the MP3 files to a website so that she can download them for free. Leo is not guilty of the crime of copyright infringement...because the total value of the music he distributed illegally is only $12.

BUT, if Leo does this with his entire music collection, which consists of hundreds of albums worth over five thousand dollars ($5,000), he may be prosecuted for copyright piracy.
Img-copyright-cd

In early 2012, the United States Congress considered amending the law on the crime of copyright infringement again, as part of the proposed Stop Online Piracy Act ("SOPA"). The proposed amendment would have made it a crime not just to copy or share works worth more than $1,000...but also to "stream" movies, music, or TV episodes worth more than $1,000 from an internet source.  17

But SOPA contained a number of other sections that were extremely controversial with internet users. Because of this, Congress is no longer considering the bill.  18 But a version of it could be passed in the future...which would mean that streaming copyrighted content without the owner's permission could also cause you to violate federal law against copyright infringement.

2.3. Distributing a work being prepared for distribution

It is also a crime to take a creative work that is being prepared for public distribution and put it on a computer network so that members of the public can access it.  19 This part of the law was passed to prevent people who managed to get their hands on a "leaked" copy of a movie, TV show episode, music album, or other creative work from putting that copy on the internet...and spoiling the official release of the work.

You can only be convicted of this crime if you either knew or should have known that the work was going to be commercially distributed at some point.  20

Example: Gil lives in New York City. One day he finds a street vendor selling an unauthorized DVD copy of the new movie in the X-Men series, which has not yet been released in theaters. Gil is curious and buys the DVD. Then, just for the heck of it, he uploads it onto a web page where anyone can view it. Gil has violated the
federal law against using the internet to distribute a copyrighted work before it's been released.  21
3. Federal criminal penalties for internet
copyright infringement

Internet piracy is a so-called "white collar crime" that often feels like a victimless crime. So it's surprising that the offense can lead to fairly steep penalties...and in some cases even a sentence in federal prison.

Infringing copyright for profit

If you infringe someone else's copyright with the goal of turning a profit, you can be fined, sentenced to up to one (1) year in federal prison, or both.  22

But the maximum sentence increases to five (5) years in prison if you make or distribute at least ten (10) copies of the work, and the copies have a total retail value of more than two thousand five hundred dollars ($2,500).  23

And for a second, third, etc., conviction for this crime, the potential sentence increases to ten (10) years in prison.  24

Reproducing or distributing copyrighted works worth more than $1,000

A prison sentence is still a possibility even if you weren't motivated by profit. Under the section of the NET Act that bans copying or sharing works worth more than one thousand dollars, the basic penalties are a fine, a sentence of up to one (1) year in prison, or both.  25

But if the number of copies involved is ten (10) or more, and they have a total retail value of more than two thousand five hundred dollars ($2,500), the maximum prison sentence is three (3) years.  26 If this is not your first conviction for this crime, the maximum sentence increases to six (6) years.  27

Works being prepared for distribution

The penalties for distributing a work that hasn't been released to the public yet depend on whether you made the work public in order to earn money, or whether you did it for some other reason.

If you leaked a work for business or financial reasons, you can be fined, imprisoned for up to five (5) years, or both. For a second conviction, the penalty rises to up to ten (10) years in prison.  28

But if you were not motivated by money or profit, the maximum prison sentence is only three (3) years, or six (6) years for a second conviction.  29

4. Examples of federal convictions for
copyright infringement

You may know people who commit the federal crime of copyright infringement regularly (for example, by getting free music from file-sharing websites). The information in this article may make you worry about them. And it should-but maybe not too much.  30

According to Riverside criminal defense attorney Michael Scafiddi:  31

"The federal Department of Justice, which is responsible for enforcing copyright law, has so far not prosecuted too many people under the NET Act. That's the good news. The bad news is that the authorities have made a small number of high-profile arrests of people who were engaged in activities that many of us would consider harmless...and that are certainly very common. It seems as if the Department of Justice's strategy with regard to this law is to make an example of a few unlucky people."

Here are some examples of people who have been prosecuted and convicted for violating the NET Act:

  1. Eric, a 24-year-old Navy technician, ran a website that attracted users by offering free software downloads (without the permission of the companies that owned the software copyrights). He was charged under the NET Act, pled guilty, and was sentenced to five (5) years of probation and a $9,600 fine. He also had to agree not to use any computer for twelve (12) months except for business or educational purposes.  32
  2. A group of Internet users worked together to share software, video games, and movies over the Internet without the permission of the copyright owners. Every member had to contribute works to the group, and in return they would get access to libraries contain large collections of other copyrighted material, worth over $1 million.

    The Federal Bureau of Investigation (FBI) conducted an undercover operation and arrested the group's members. Three members received prison sentences ranging from five (5) to thirty (30) months.  33

  3. Jason, a 25-year-old computer technician, found a free copy of the movie "Star Wars: Episode One" on a fan website. He posted it on his own webpage and encouraged visitors to the page to download it from him. Jason had no idea he was doing anything illegal. But he was prosecuted for internet copyright violations and ended up being sentenced to two (2) years' probation and a $250 fine.  34
  4. You may remember the example we gave above of Gil, who bought a DVD of an X-Men movie from a street vendor before the movie was released and posted it on the internet. Gil's story really happened...and he ended up being convicted of copyright piracy and sentenced to one (1) year in federal prison.  35
5. Related offenses: Internet fraud

Copyright violations aren't the only crimes that prosecutors (both federal and state) are cracking down on. Prosecutions for other forms of cybercrime such as
internet fraud have also increased drastically in the past few years.

Img-copyright-computer

Common forms of internet fraud in California include:

  • Fraud schemes carried out over the internet or email (like non-delivery merchandise fraud and advance fee fraud);
  • "Phishing" (tricking e-mail or internet users into giving out personal information like social security numbers or credit card numbers); and
  • Accessing a computer or a computer network without the owner's permission.

Internet fraud can lead to charges under either federal or California law.  36 The penalties for a conviction can run to as much as twenty (20) years in federal prison.37

Call us for help...
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If you or loved one is charged with internet copyright infringement and you are looking to hire an attorney for representation, we invite you to contact us at Shouse Law Group. We can provide a free consultation in office or by phone. We have local offices in Los Angeles, the San Fernando Valley, Pasadena, Long Beach, Orange County, Ventura, San Bernardino, Rancho Cucamonga, Riverside, San Diego, Sacramento, Oakland, San Francisco, San Jose and throughout California.

Legal References:

1See 17 United States Code ("U.S.C.") § 106 - Exclusive rights in copyrighted works. ("Subject to sections 107 through 122, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following: (1)to reproduce the copyrighted work in copies or phonorecords; (2)to prepare derivative works based upon the copyrighted work; (3)to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending; (4)in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly; (5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and (6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.")

217 U.S.C. § 201 - Ownership of copyright. ("(a) Initial Ownership.- Copyright in a work protected under this title vests initially in the author or authors of the work. The authors of a joint work are coowners of copyright in the work.")

3 17 U.S.C. § 204 - Execution of transfers of copyright ownership.

417 U.S.C. § 501 - Infringement of copyright [including internet copyright violations]. ("(a) Anyone who violates any of the exclusive rights of the copyright owner as provided by sections 106 through 122 or of the author as provided in section 106A(a), or who imports copies or phonorecords into the United States in violation of section 602, is an infringer of the copyright or right of the author, as the case may be.")

5 Declan McCullagh, "Perspective: The new jailbird jingle," CNet, Jan. 27, 2003.

6Same.

7 Our California and federal criminal defense attorneys have local Los Angeles law offices in Beverly Hills, Burbank, Glendale, Lancaster, Long Beach, Los Angeles, Pasadena, Pomona, Torrance, Van Nuys, West Covina, and Whittier.  We have additional law offices conveniently located throughout the state in Orange County, San Diego, Riverside, San Bernardino, Ventura, San Jose, Oakland, the San Francisco Bay area, Sacramento, and several nearby cities.

8 Eric Goldman and Julia Alpert Gladstone, "'No Electronic Theft Act' Proves a Partial Success," National Law Journal, 2002.

9 Same.

10 United States v. LaMacchia (D.Mass. 1994), 871 F.Supp.535.

11 Eric Goldman and Julia Alpert Gladstone, "'No Electronic Theft Act' Proves a Partial Success," National Law Journal, 2002.

12 See Brian P. Heneghan, "The NET Act, Fair Use, and Willfulness - Is Congress Making a Scarecrow of the Law?", 2002 Journal of High Technology Law 27, at 27-30.

13 17 U.S.C. § 506 - Criminal offenses. ("((1) In general.--Any person who willfully infringes a copyright [including through online piracy] shall be punished as provided under section 2319 of title 18, if the infringement was committed-- (A) for purposes of commercial advantage or private financial gain; . . . .")

14 Loosely based on the facts of United States v. Beltran (1st Cir. 2007), 503 F.3d 1, 2.

15 17 U.S.C. § 506 - Criminal offenses. ("((1) In general.--Any person who willfully infringes a copyright [through internet copyright infringement] shall be punished as provided under section 2319 of title 18, if the infringement was committed-- (A) for purposes of commercial advantage or private financial gain; (B) by the reproduction or distribution, including by electronic means, during any 180-day period, of 1 or more copies or phonorecords of 1 or more copyrighted works, which have a total retail value of more than $1,000; . . . .")

See also Black's Law Dictionary (9th ed. 2009), willful. ("Voluntary and intentional, but not necessarily malicious.")

16 Same.

17 H.R. 3261 - Stop Online Piracy Act, Sec. 201 - Streaming of Copyrighted Works in Violation of Criminal Law.

18 Victor Luckerson, Coming Soon: A Softer Approach to Online Piracy, Time, June 26, 2012.

19 17 U.S.C. § 506. ("(1) In general.--Any person who willfully infringes a copyright [including internet infringement] shall be punished as provided under section 2319 of title 18, if the infringement was committed-- . . . (C) by the distribution of a work being prepared for commercial distribution, by making it available on a computer network accessible to members of the public, if such person knew or should have known that the work was intended for commercial distribution.")

20 Same.

21 Michael Wilson, "Adventures of the 'Wolverine' Leaker," The New York Times, Jan. 12, 2010.

2218 U.S.C. § 2319 - Criminal infringement of a copyright. ("(b) Any person who commits an offense under section 506(a)(1)(A) of title 17 [internet copyright infringement] -- (1) shall be imprisoned not more than 5 years, or fined in the amount set forth in this title, or both, if the offense consists of the reproduction or distribution, including by electronic means, during any 180-day period, of at least 10 copies or phonorecords, of 1 or more copyrighted works, which have a total retail value of more than $2,500;  (2) shall be imprisoned not more than 10 years, or fined in the amount set forth in this title, or both, if the offense is a felony and is a second or subsequent offense under subsection (a); and (3) shall be imprisoned not more than 1 year, or fined in the amount set forth in this title, or both, in any other case.")

23 Same.

24 Same.

25 18 U.S.C. § 2319 - Criminal infringement of a copyright.(" (c) Any person who commits an offense under section 506(a)(1)(B) of title 17 [internet copyright violations] -- (1) shall be imprisoned not more than 3 years, or fined in the amount set forth in this title, or both, if the offense consists of the reproduction or distribution of 10 or more copies or phonorecords of 1 or more copyrighted works, which have a total retail value of $2,500 or more; (2) shall be imprisoned not more than 6 years, or fined in the amount set forth in this title, or both, if the offense is a felony and is a second or subsequent offense under subsection (a); and (3) shall be imprisoned not more than 1 year, or fined in the amount set forth in this title, or both, if the offense consists of the reproduction or distribution of 1 or more copies or phonorecords of 1 or more copyrighted works, which have a total retail value of more than $1,000.")

26 Same.

27 Same.

28 18 U.S.C. § 2319 - Criminal infringement of a copyright. ("(d) Any person who commits an offense under section 506(a)(1)(C) of title 17 [internet copyright infringement] -- (1) shall be imprisoned not more than 3 years, fined under this title, or both; (2) shall be imprisoned not more than 5 years, fined under this title, or both, if the offense was committed for purposes of commercial advantage or private financial gain; (3) shall be imprisoned not more than 6 years, fined under this title, or both, if the offense is a felony and is a second or subsequent offense under subsection (a); and (4) shall be imprisoned not more than 10 years, fined under this title, or both, if the offense is a felony and is a second or subsequent offense under paragraph (2).")

29 Same.

30 See Declan McCullagh, "Perspective: The new jailbird jingle," CNet, Jan. 27, 2003 (discussing how few internet copyright violation prosecutions had been brought under the NET Act by 2003).

31 Riverside criminal defense attorney Michael Scafiddi is a former police officer and police sergeant who has investigated cases ranging from DUI to child abuse to carjacking. He represents clients in all San Bernardino County courthouses and Riverside County courthouses, where he is on a first-name basis with judges, prosecutors, probation officers, and police detectives..

32 See Eric Goldman and Julia Alpert Gladstone, "'No Electronic Theft Act' Proves a Partial Success," National Law Journal, 2002.

33 Same. See also "Nine Indicted in Chicago in $1 Million 'Fastlane' Software Piracy Conspiracy [For Internet Copyright Violations]," USDOJ, N.D.Ill. Press Release, Feb. 16, 2011.

34 Jason Thompson, Copyright on Trial, Streaming Media Magazine, May 30, 2001.

35 Matthew Belloni, "'X-Men: Wolverine' Pirate Sentenced to Year in Federal Prison [For Copyright Infringement]," The Hollywood Reporter, Dec. 19, 2011.

36 For example, see U.S.C. § 1343 - Fraud by wire [internet fraud], radio, or television; 18 U.S.C. § 1028 - Internet fraud and related activity in connection with identification documents, authentication features, and information; Penal Code 530.5 PC - Unauthorized use of personal identifying information of another person; attempt to obtain credit, goods, services, real property or medical information; commission of crime; punishment for first, subsequent or multiple offenses; sale of information; mail theft; liability of computer service or software providers; and Penal Code 502 PC.

37 U.S.C. § 1343 - Fraud by wire [internet fraud], radio, or television.

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