United States v. Anderson
741 F.3d 938 (2013)
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Rule of Law:
Under the Mandatory Victims Restitution Act, restitution in a criminal copyright infringement case must be based on the victim's actual loss, which is measured by the lost profits on sales that were verifiably diverted due to the defendant's infringing conduct, not by the defendant's gains or the full retail value of the infringed goods.
Facts:
- Roosevelt Anderson, Jr., a cab driver, began an online operation selling Adobe software under the moniker 'Moneyworldl23' through websites like Pricegrabber and Anderson9000.com.
- Anderson sold the software on consumer-grade 'burned' discs, which he advertised as 'full' or 'complete' 'OEM' products.
- The discs contained a 'terms and conditions' document stating the software was for 'archival purposes' or as a 'backup' copy, but customers could install and use the full software without viewing these terms.
- Anderson packaged the software with serial numbers he created using a 'key generator' program, which bypassed Adobe's standard activation process.
- He sold software with a retail price of $999 for as low as $262.90.
- At least two customers complained to Anderson that his product was illegal and constituted pirated software, but he continued his operation after issuing them refunds.
- An Adobe investigator and a U.S. Postal Inspector made undercover purchases from Anderson, which led to his identification.
- Upon his arrest, authorities found blank discs, additional copies of Adobe software, a key generator disc, and discs with Adobe plug-ins in Anderson's rental car.
Procedural Posture:
- Roosevelt Anderson, Jr. was charged with criminal copyright infringement in a federal district court.
- Prior to trial, Anderson moved to preclude the government from introducing evidence of uncharged conduct, but the district court denied the motion.
- Following a four-day trial, the jury found Anderson guilty.
- The district court sentenced Anderson to 24 months of imprisonment and ordered him to pay $247,144 in restitution to Adobe.
- Anderson appealed his conviction and the restitution order to the U.S. Court of Appeals for the Ninth Circuit.
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Issue:
In a criminal copyright infringement case, must a restitution award under the Mandatory Victims Restitution Act be based on the victim's actual loss, calculated as lost profits on diverted sales, rather than the defendant's gains or the full retail value of the infringed goods?
Opinions:
Majority - Callahan, Circuit Judge
Yes. A restitution award in a criminal copyright case must reflect the victim’s actual losses, which consists of the copyright owner’s lost profits on sales that would have taken place if not for the infringing conduct. The court affirmed Anderson's conviction but vacated the restitution order. On the issue of the jury instructions, the court found that while the instruction on 'willfulness' was flawed because it used the vague word 'may,' it did not rise to the level of plain error. The error was cured by a subsequent sentence that correctly required the jury to find Anderson knew his actions constituted copyright infringement, and Anderson's counsel had acquiesced to the final instruction. On the evidentiary issue, the court held that evidence of uncharged software sales (like the Adobe Fireworks sale) was properly admitted as 'intrinsic' evidence because it was necessary to provide a coherent story of Anderson's business operations and the circumstances leading to his arrest. The court's primary holding concerned restitution, where it found the district court erred by calculating the award based on the full retail price of the software sold. Citing precedent from the D.C. and Eighth Circuits, the court established that the correct measure is the victim's actual loss, meaning lost profits on sales demonstrably diverted by the defendant's actions. The government cannot simply assume that every consumer who purchased an infringing copy at a discount would have purchased an authentic copy at full price.
Analysis:
This decision aligns the Ninth Circuit with other federal circuits on the proper method for calculating restitution in criminal copyright cases, solidifying a victim-centric 'actual loss' standard. By rejecting restitution based on full retail value or the infringer's gross receipts, the court places a significant burden on the government and copyright holders to prove causation—that specific sales were actually lost due to the infringement. This precedent makes it more difficult to secure large, speculative restitution awards and forces a more precise, evidence-based calculation focused on lost profits, which could temper the financial penalties in future piracy cases.
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