United States v. Julius Chow Lieh Liu
2013 WL 5433753, 108 U.S.P.Q. 2d (BNA) 1371, 731 F.3d 982 (2013)
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Rule of Law:
To secure a conviction for criminal copyright infringement, the government must prove the defendant acted 'willfully,' meaning they intentionally violated a known legal duty. For trafficking in counterfeit labels, the government must prove the defendant acted 'knowingly,' meaning they knew the labels were counterfeit.
Facts:
- Julius Liu was the founder and CEO of Super DVD, a company that commercially replicated CDs and DVDs for various clients.
- In 2001, Super DVD manufactured DVDs of the film 'Crouching Tiger, Hidden Dragon' for a client, R & E Trading. After R & E rejected the order and refused to pay, Liu sued them, alleging they had deceived Super DVD about owning the copyrights.
- Super DVD replicated Latin music compilations for a client named Juan Valdez, who claimed he owned the rights. Liu believed him after listening to the tracks and hearing Valdez's voice.
- As a general practice, Super DVD required its customers to sign agreements stating that they possessed the copyrights to the works being replicated and would assume all related legal responsibilities.
- In May 2003, federal agents discovered counterfeit copies of Norton Anti-Virus software at a reseller in Florida, along with shipping labels and purchase orders linking the items to Super DVD.
- In July 2003, agents executed a search warrant on Super DVD's warehouse and recovered thousands of unauthorized CDs and DVDs, including 'Crouching Tiger, Hidden Dragon,' 'Beatles 1,' and various music compilations.
Procedural Posture:
- The federal government charged Julius Liu in the U.S. District Court for the Northern District of California with three counts of criminal copyright infringement and one count of trafficking in counterfeit labels.
- Following a three-day trial, a jury found Liu guilty on all counts.
- The district court sentenced Liu to four years in prison followed by three years of supervised release.
- Liu, as the appellant, appealed his convictions and sentence to the United States Court of Appeals for the Ninth Circuit, with the United States as the appellee.
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Issue:
Does the 'willfully' element of criminal copyright infringement require the government to prove that the defendant knew their conduct was unlawful, rather than merely proving the defendant intentionally made the copies?
Opinions:
Majority - Nguyen, Circuit Judge
Yes. The term 'willfully' in the criminal copyright infringement statute, 17 U.S.C. § 506(a), requires the government to prove a 'voluntary, intentional violation of a known legal duty.' The district court misstated the law by instructing the jury that 'willfully' only meant the act was done knowingly and intentionally, which is the standard for civil liability, not criminal conviction. The court reasoned that 'willfully' is an ambiguous term that, in the context of complex criminal statutes, requires a specific intent to violate the law, as established in precedents like Cheek v. United States. This higher standard is necessary to create a meaningful distinction between strict-liability civil infringement and more culpable criminal infringement. The court found further support in the legislative history of the No Electronic Theft (NET) Act of 1997, which clarified that evidence of reproduction alone is insufficient to establish willfulness. The instructional error was not harmless because Liu presented evidence that he believed his clients held the copyrights, which a properly instructed jury could have credited. The court also held that for the charge of trafficking in counterfeit labels, 'knowingly' requires proof the defendant knew the labels were counterfeit, and the district court's instruction on this count was also erroneous and not harmless.
Analysis:
This decision significantly clarifies the mens rea (mental state) required for criminal copyright infringement in the Ninth Circuit, establishing a high bar for prosecutors. By defining 'willfully' as knowledge of illegality, the court aligns copyright crime with other specific-intent offenses like tax evasion, thereby protecting individuals who might infringe without realizing their conduct is unlawful. This reinforces the critical distinction between civil infringement, which is a strict liability offense, and criminal infringement, which requires a more culpable state of mind. Consequently, future prosecutions will require more direct or substantial circumstantial evidence of a defendant's knowledge that their actions violated copyright law, rather than just proof of unauthorized copying for financial gain.
