[Federal Register Volume 64, Number 246 (Thursday, December 23, 1999)]
[Notices]
[Pages 72129-72134]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-33380]
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UNITED STATES SENTENCING COMMISSION
Sentencing Guidelines for United States Courts
AGENCY: United States Sentencing Commission.
ACTION: Notice of: (1) Proposed options for promulgating a temporary,
emergency guideline amendment revising the guideline for offenses
involving electronic copyright infringement; and (2) intent to re-
promulgate as a permanent amendment to the sentencing guidelines the
temporary emergency guideline amendment relating to telemarketing fraud
offenses. Request for Comment. Notice of public hearing.
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SUMMARY: (1) The Commission is preparing to promulgate a temporary,
emergency guideline amendment to Sec. 2B5.3 (Criminal Infringement of
Copyright or Trademark) and accompanying commentary to implement the
directive contained in section 2(g) of the No Electronic Theft (NET)
Act of 1997. This notice sets forth three options for implementing that
directive.
The proposed amendment is presented in one of two formats. First,
the amendment is proposed as specific revisions to guideline Sec. 2B5.3
and accompanying commentary. Bracketed text within a proposed amendment
indicates a heightened interest on the Commission's part for comment
and suggestions for alternative policy choices; for example, a proposed
enhancement of [2] levels indicates that the Commission is considering,
and invites comment on, alternative policy choices regarding the
appropriate level of enhancement. Similarly, a bracketed specific
offense characteristic means that the Commission invites comment on
whether the provision is appropriate as a specific offense
characteristic, or whether it should be considered as a departure
factor, or not at all. Second, the Commission has highlighted certain
issues for comment and invites suggestions for how the Commission
should respond to those issues.
Recently, Congress clarified the Commission's emergency amendment
authority to implement the directive in the NET Act. The Commission
must implement that directive within 120 days of the enactment of the
Digital Theft Deterrence and Copyright Damages Improvement Act of 1999
(not later than April 6, 2000).
(2) The Commission proposes to make permanent the temporary,
emergency guideline amendment to Sec. 2F1.1 (Fraud and Deceit) and
Sec. 3A1.1 (Hate Crime Motivation or Vulnerable Victim) promulgated by
the Commission in September 1998. This emergency amendment was issued
to implement section 6 of the Telemarketing Fraud Prevention Act of
1998. The Commission proposes to re-promulgate as a permanent amendment
the temporary emergency telemarketing fraud amendment without change.
DATES: (1) The NET Act temporary, emergency amendment.--Comment on the
proposed amendment should be received by the Commission not later than
January 26, 2000. After considering any public comment, the Commission
plans to promulgate a temporary emergency amendment not later than
April 6, 2000. (2) The telemarketing fraud amendment.--Comment on the
proposed re-promulgation of the telemarketing fraud amendment should be
received not later than March 10, 2000. (3) Public hearing.--The
Commission has scheduled a public hearing for March 23, 2000, at the
Thurgood Marshall Federal Judiciary Building, One Columbus Circle,
N.E., Washington, D.C. 20002-8002 (time to be announced). The scope of
the hearing is expected to include the proposed re-promulgation of the
telemarketing fraud amendment described herein and any other permanent
amendments that may be proposed for action in this amendment cycle
ending May 1. (The Commission may promulgate a temporary, emergency
guideline amendment to implement the NET Act before the public hearing
on March 23.) A person who desires to testify at the public hearing
should notify Michael Courlander, Public Affairs Officer, at (202) 502-
4590 not later than March 10, 2000. Written testimony for the hearing
must be received by the Commission not later than March 16, 2000.
Submission of written testimony is a requirement for testifying at the
public hearing.
ADDRESSES: Send comments to: United States Sentencing Commission, One
Columbus Circle, N.E., Suite 2-500 South, Washington, DC 20002-8002,
Attention: Public Information--Public Comment.
FOR FURTHER INFORMATION CONTACT: Michael Courlander, Public Affairs
Officer, Telephone: (202) 502-4590.
SUPPLEMENTARY INFORMATION: Reports and other additional information
pertaining to the proposed amendments described in this notice may be
accessed through the Commission's website at www.ussc.gov.
Authority: 28 U.S.C. 994(a), (o), (p), (x); USSC Rules of
Practice and Procedure 4.3, 4.4.
Diana E. Murphy,
Chair.
Proposed Temporary, Emergency Guideline Amendment
1. Synopsis of Proposed Amendment: The No Electronic Theft (NET)
Act of 1997, Pub. L. 105-147, directs the Commission to: (1) Ensure
that the applicable guideline range for a crime committed against
intellectual property (including offenses set forth at section 506(a)
of title 17, United States Code, and sections 2319, 2319A, and 2320 of
title 18, United States Code) is sufficiently stringent to deter such a
crime; and (2) ensure that the guidelines provide for consideration of
the retail value and quantity of the items with respect to which the
intellectual property offense was committed.
This proposal presents three options for implementing the
congressional directives. Each option implements the directives by
changing the monetary calculation currently found in the copyright and
trademark infringement guideline, Sec. 2B5.3, to provide for
consideration of the retail value of the infringed item. (Currently,
Sec. 2B5.3(b)(1) contains an enhancement based on a calculation of the
retail value of the infringing item multiplied by the quantity of
infringing items.) Some or all of a number of aggravating and
mitigating factors could be incorporated into the guideline as an
additional means of implementing the directive to provide sufficient
deterrence. (These factors, or some combination thereof, are presented
in Options 2 and 3 but
[[Page 72130]]
could be added to Option 1 as well. In addition, any number of these
factors could form the basis for a departure provision.)
The NET Act gave the Commission emergency authority to promulgate
temporary amendments necessary to implement the Act's directives. The
recently enacted Digital Theft Deterrence and Copyright Damages
Improvement Act of 1999 requires the Commission to promulgate the
emergency amendments within 120 days after the date of the enactment of
that Act, i.e., by April 6, 2000.
(A) Option 1
Option 1 provides the most direct and straightforward manner for
implementing the directive to provide for consideration of the retail
value of the infringed item. Option 1 amends the copyright and
trademark infringement guideline to provide a sentencing enhancement
based on a calculation of the retail value of the infringed item
multiplied by the quantity of infringing items for all copyright and
trademark offenses. As presented, it does not incorporate any
additional enhancements or adjustments for aggravating or mitigating
factors, nor does it propose any change in the base offense level
(although this, too, could be made a part of that option).
An arguable disadvantage of Option 1 is that it likely would
overstate the pecuniary harm caused to copyright and trademark owners
in the majority of cases currently sentenced under the guideline
because it presumes: (1) a one-to-one correlation between the sale of
infringing items and the displaced sale of legitimate infringed items,
which is unlikely in most cases, and (2) that the pecuniary harm
resulting from each lost sale is equal to the retail value of the
infringed item. Proposed Application Note 3 would address substantial
overstatement of pecuniary harm through an invited downward departure
provision. That proposed application note would also provide an upward
departure provision for cases in which the pecuniary harm is
substantially understated.
Proposed Amendment--Option 1: Strike Sec. 2B5.3 in its entirety and
insert the following:
Sec. 2B5.3. Criminal Infringement of Copyright or Trademark
(a) Base Offense Level: 6
(b) Specific Offense Characteristic
(1)(A) Except as provided in subdivision (B), if the retail
value of the infringed items multiplied by the quantity of
infringing items exceeded $2,000, increase by the number of levels
from the table in Sec. 2F1.1 (Fraud and Deceit) corresponding to
that amount.
(B) If (i) the defendant was convicted of an offense under 18
U.S.C. 2319A; and (ii) the retail value of the infringing items
multiplied by the quantity of infringing items exceeded $2,000,
increase by the number of levels from the table in Sec. 2F1.1 (Fraud
and Deceit) corresponding to that amount.
Commentary
Statutory Provisions: 17 U.S.C. 506(a); 18 U.S.C. 2318-2320,
2511. For additional statutory provision(s), see Appendix A
(Statutory Index).
Application Notes
1. Definitions.--For purposes of this guideline:
``Infringed items'' means the copyrighted or trademarked items
with respect to which the crime against intellectual property was
committed.
``Infringing items'' means the items that violate the copyright
or trademark laws (not the legitimate items that are infringed
upon).
2. In a case involving the illegal interception of a satellite
cable transmission in violation of 18 U.S.C. 2511, the ``retail
value of the infringed items'', for purposes of subsection
(b)(1)(A), is the price the user of the transmission would have paid
to lawfully receive that transmission. (In such a case, the
``infringed items'' are the satellite transmissions rather than the
intercepting devices.)
[3. Departure Provision.--There may be cases in which the
offense level determined under subsection (b)(1) substantially
understates or substantially overstates the pecuniary harm caused by
the offense. In such cases, an upward departure or a downward
departure, as appropriate, may be warranted.]
Background: Subsection (b)(1) implements section 2(g) of the No
Electronic Theft (NET) Act of 1997, which directs the Commission to
ensure that the guidelines provide for consideration of the retail
value and quantity of the items with respect to which the
intellectual property offense was committed.
Section 2511 of title 18, United States Code, as amended by the
Electronic Communications Act of 1986, prohibits the interception of
satellite transmission for purposes of direct or indirect commercial
advantage or private financial gain. Such violations are similar to
copyright offenses and are therefore covered by this guideline.
(B) Option 2
Option 2 is a revised proposal submitted by the Department of
Justice in August 1998 in response to the Commission's May 1998 Federal
Register notice (see 63 FR 28202 (1998)) and has not previously been
published in the Federal Register. Like Option 1, Option 2 amends the
copyright and trademark infringement guideline to provide an
enhancement based on a calculation of the retail value of the infringed
items multiplied by the quantity of infringing items for all copyright
and trademark offenses (except offenses involving a copyright violation
of 18 U.S.C. 2319A, for which there is no infringed item). In contrast
to Option 1, the Department proposed a 2-level reduction in offense
level (but not less than offense level 6) for offenses involving
infringing goods with a price less than 10% of the average retail price
of the infringed item. According to the Department of Justice, this
downward adjustment is proposed to address the likelihood that
``relying on the price of the infringed-upon item may lead to an
inappropriately high economic harm calculation where there is a
dramatic price differential between the genuine and illegal products.''
The Commission has bracketed options for this reduction that would
provide a 2-level downward adjustment for cases in which the price of
the infringing item is [10%] [20%] [30%] [40%] [50%] of the retail
price of the infringed item.
In addition, Option 2 includes adjustments for two aggravating
factors and one mitigating factor. It provides a 2-level increase for
offenses involving ``online electronic infringement,'' and a 2-level
increase for offenses involving a ``reasonably foreseeable risk to
public health or safety,'' with a minimum offense level of level 13. It
also provides a 2-level decrease (but not less than offense level 6) if
the offense was not committed for purposes of commercial advantage or
private financial gain.
Proposed Amendment--Option 2: Strike Sec. 2B5.3 in its entirety and
insert the following:
Sec. 2B5.3. Criminal Infringement of Copyright or Trademark
(a) Base Offense Level: 6
(b) Specific Offense Characteristics
(1) Except as provided in subsection (2), if the infringed value
exceeded $2,000, increase by the number of levels from the monetary
table in Sec. 2F1.1 (Fraud and Deceit) corresponding to that value.
(2) If (A) the offense involved a copyright violation under 19
U.S.C. 2319A; and (B) the infringing value exceeded $2,000, increase
by the number of levels from the monetary table in Sec. 2F1.1
corresponding to that value.
(3) If the offense involved online electronic infringement,
increase by 2 levels.
(4) If (A) the offense was not committed for commercial purpose
or private financial gain, or (B) subsection (1) applies and the
offense involved greatly discounted merchandise, decrease by 2
levels, but not below level 6.
(5) If the offense involved a reasonably foreseeable risk to
public health or safety, increase by 2 levels. If the resulting
offense level is less than level [13], increase to level [13].
Commentary
Statutory Provisions: 17 U.S.C. 506(a); 18 U.S.C. 2318-2320,
2511. For additional statutory provision(s), see Appendix A
(Statutory Index).
Application Notes
1. For purposes of this guideline--
[[Page 72131]]
``Infringed value'' means the average retail price of the
infringed-upon item multiplied by the number of the infringing
items. Average retail price of the infringed-upon item means the
average price in the retail market at the time of the offense, which
may be different from the Manufacturer's Suggested Retail Price. In
cases involving the interception of a communication in violation of
18 U.S.C. 2511, the infringed value means the price the user would
have paid if that communication had been obtained lawfully.
``Infringing value'' means the price of the infringing item
multiplied by the number of infringing items.
``Greatly Discounted Merchandise'' means infringing goods whose
price is less than [10%][20%][30%][40%][50%] of the average retail
price of the infringed-upon item.
``Online Electronic Infringement'' includes the unlawful
producing, reproducing, distributing, selling, performing, or
trafficking in copyrighted or trademarked articles or services via
an electronic bulletin board, a worldwide web site or any online
facility.
``Commercial advantage or private financial gain'' includes
receipt, or expectation of receipt, of anything of value, including
the receipt of other protected works or products.
2. In some cases a 2-level enhancement may not reflect the
seriousness of the risk to public health or safety. In such cases,
an upward departure may be warranted.
Background: This guideline treats copyright and trademark
violations much like fraud. The enhancements in subsections (b)(1)
and (2) are intended as an approximate determination of the
aggregate pecuniary harm resulting from trafficking in goods or
services that violate the copyright or trademark laws. The reduction
in subsection (b)(4) for greatly discounted merchandise is
appropriate because in such cases there is some reduced likelihood
of loss of legitimate sales.
The Electronic Communications Privacy Act of 1986 prohibits the
interception of satellite transmission for purposes of direct or
indirect commercial advantage or private financial gain. Such
violations are similar to copyright offenses and are therefore
covered by this guideline.
(C) Option 3
Like Options 1 and 2, Option 3 amends the copyright and trademark
infringement guideline to provide for consideration of the retail value
of the infringed item in all copyright and trademark cases, but that
value ultimately might not be used in every case. For some cases, the
retail value of the infringing item is used to calculate the monetary
adjustment because that value is the more accurate measure of the
pecuniary harm to the intellectual property owner for those cases.
Option 3 directs the court to use the retail value of the infringed
item multiplied by the quantity of infringing items in any case in
which: (1) the quality and performance of the infringing item are
identical to, or substantially indistinguishable from, the infringed
item; (2) the retail value of the infringing item is difficult or
impossible to determine; or (3) the offense involves the illegal
interception of a satellite cable transmission in violation of 18
U.S.C. 2511; or any other case in which the government provides
sufficient information to demonstrate that the retail value of the
infringed item provides a more accurate assessment of pecuniary harm to
the copyright or trademark owner than the retail value of the
infringing item. The court would use the retail value of the infringing
item multiplied by the quantity of infringing items (the calculation
that currently exists in Sec. 2B5.3) for all other copyright and
trademark offenses.
Option 3 implements the second directive of the NET Act (to provide
for consideration of the retail value of the infringed item) by
permitting the government to show, for any intellectual property
offense, that such value is the more accurate assessment of lost sales
to the intellectual property owner than is the use of the retail value
of the infringing item. An arguable advantage of Option 3 over Options
1 and 2 is that, by using the retail value of the infringing item in
some cases, such as those involving obviously inferior counterfeited
goods, it reduces the likelihood that the pecuniary harm would be
overstated when the sale of a counterfeit item is not likely to
displace the sale of a legitimate item on a one-to-one basis.
Option 3 also presents a number of enhancements and adjustments
that, as mentioned above, take into account aggravating and mitigating
factors that may be present in an infringement case. For ease and
clarity of presentation, they are presented for the most part as
specific offense characteristics. However, there is an issue for
comment following Option 3 that addresses whether the Commission should
adopt these as departure provisions, or not at all.
The possible additional enhancements and adjustments are as
follows:
1. Increase the base offense level from level 6 to level 8. A 2-
level increase in the base offense level would bring the infringement
guideline more in line with the fraud guideline, Sec. 2F1.1. Both
guidelines have a base of offense level of level 6; however, the fraud
guideline contains a 2-level enhancement for more than minimal
planning, which applies in the great majority of fraud offenses. A
similar enhancement does not exist in the infringement guideline, but,
based on a review of cases sentenced under the guideline, if a more
than minimal planning enhancement did exist, it similarly would apply
in the majority of infringement cases. Thus, the majority of fraud
offenses effectively start at an offense level of level 8, whereas
infringement cases start at an offense level of level 6.
2. Provide an enhancement of 2 offense levels (or suggested upward
departure) if the infringing item was distributed by the offender
before the copyright or trademark owner commercially released the
infringed item. If the infringing item is a close substitute for the
infringed item, the harm is exacerbated by denying the copyright or
trademark owner the front end of the market. If the infringing item is
substantially inferior, the harm is exacerbated by damaging the
reputation of the copyright or trademark owner.
3. Provide an enhancement of 2 offense levels (or suggested upward
departure) if purchasers of the infringing item were deceived to
believe that they were purchasing the legitimate infringed item. This
enhancement takes into account harm to the consumer who is actually
deceived, over and above the harm to the copyright or trademark owner.
However, this enhancement may present significant proof problems. An
attempt to ameliorate those problems by lowering the standard for
triggering the enhancement to something less than actual deception,
such as the reasonable likelihood of deception, risks promulgating an
enhancement that is triggered merely by an element of the offense (see
18 U.S.C. 2320(e)).
4. Provide a downward adjustment of 2 offense levels, but not less
than the base offense level, (or suggested downward departure) if the
offense was not committed for commercial advantage or private financial
gain. This proposed adjustment is identical to one included in Option 2
and takes into account the different statutory penalty structures
established for these offenses by the NET Act. The Commission has been
unable to determine the frequency with which such a downward adjustment
would apply because the statutory change criminalizing such conduct was
enacted in December 1997, and has formed the basis for a very limited
number of prosecutions.
5. Provide an enhancement of 2 offense levels (and a minimum
offense level of level 12) if the offense involved the manufacture,
importation, or uploading of infringing items. The uploading prong is
somewhat similar to the 2-level enhancement proposed in Option 2 for
online electronic infringement. The Commission estimates that this
enhancement would
[[Page 72132]]
apply in approximately 60% of the cases currently sentenced under
Sec. 2B5.3. Defendants who manufacture, import, or upload infringing
items arguably are more culpable because they initially place
infringing items in the stream of commerce, thereby enabling many
others to infringe the copyright or trademark.
6. Provide an enhancement of 2 offense levels [and minimum offense
level of level 13 as proposed in Option 2] (or suggested upward
departure ) if the offense involved the conscious or reckless risk of
serious bodily injury. The Commission's review of cases sentenced under
the guideline suggests that this enhancement rarely would apply, which
might argue for taking this factor into account as a departure
provision, if at all.
7. Provide an application note that expressly provides that
Sec. 3B1.3 (Abuse of Position of Trust or Use of Special Skill) will
apply if the defendant engaged in de-encryption or circumvented some
other technological security measure in order to gain initial access to
copyrighted material. Alternatively, the Commission could suggest an
upward departure or specific offense characteristic for such cases. As
stated in the background commentary to Sec. 3B1.3, persons who use a
special skill to facilitate or commit a crime generally are viewed as
more culpable. Based on the Commission's review of cases sentenced
under the copyright and trademark infringement guideline, it is
anticipated that this adjustment rarely would be applied.
Proposed Amendment--Option 3: Strike Sec. 2B5.3 in its entirety and
insert the following:
Sec. 2B5.3. Criminal Infringement of Copyright or Trademark
(a) Base Offense Level: [8]
(b) Specific Offense Characteristics
(1) If the infringement amount exceeded $2,000, increase by the
number of levels from the table in Sec. 2F1.1 (Fraud and Deceit)
corresponding to that amount.
[(2) If the infringing item was distributed before the infringed
item was commercially released by the copyright or trademark owner,
increase by [2] levels.]
[(3) If a purchaser of an infringing item actually believed such
item was the infringed item, increase by [2] levels.]
[(4) If the offense was not committed for commercial advantage
or private financial gain, decrease by [2] levels[, but not less
than level [6][8]].]
[(5) If the offense involved the manufacture, importation, or
uploading of infringing items, increase by [2] levels. If the
resulting offense level is less than level [12], increase to level
[12].]
[(6) If the offense involved the conscious or reckless risk of
serious bodily injury, increase by [2] levels.] If the resulting
offense level is less than level [13], increase to level [13].]
Commentary
Statutory Provisions: 17 U.S.C. 506(a); 18 U.S.C. 2318-2320,
2511. For additional statutory provision(s), see Appendix A
(Statutory Index).
Application Notes
1. Definitions.--For purposes of this guideline:
``Commercial advantage or private financial gain'' means the
receipt, or expectation of receipt, of anything of value, including
other protected works.
``Infringed item'' means the copyrighted or trademarked item
with respect to which the crime against intellectual property was
committed.
``Infringement amount'' means the approximate pecuniary harm to
the copyright or trademark owner caused by the offense.
``Infringing item'' means the item that violates the copyright
or trademark laws.
``Uploading'' means making an infringing item available by
electronic means with the intent to enable other persons to download
or otherwise copy, or have access to, the infringing item.
2. Determination of Infringement Amount.--This note applies to
the determination of the infringement amount for purposes of
subsection (b)(1).
(A) Use of Retail Value of Infringed Item.--The infringement
amount is the retail value of the infringed item, multiplied by the
number of infringing items, in a case involving any of the
following:
(i) The quality and performance of the infringing item are
identical to, or substantially indistinguishable from, the infringed
item.
(ii) The retail value of the infringing item is (I) difficult to
determine without unduly complicating or prolonging the sentencing
proceeding; or (II) impossible to determine.
(iii) The offense involves the illegal interception of a
satellite cable transmission in violation of 18 U.S.C. Sec. 2511.
(In a case involving such an offense, the `retail value of the
infringed item' is the price the user of the transmission would have
paid to lawfully receive that transmission, and the `infringed item'
is the satellite transmission rather than the intercepting device.)
(iv) The government provides sufficient information to
demonstrate that the retail value of the infringed item provides a
more accurate assessment of the pecuniary harm to the copyright or
trademark owner than does the retail value of the infringing item.
(B) Use of Retail Value of Infringing Item.--The infringement
amount is the retail value of the infringing item, multiplied by the
number of infringing items, in any case not covered by subdivision
(A) of this Application Note, including a case involving the
unlawful recording of a musical performance in violation of 18
U.S.C. 2319A.
(C) Determination of Infringement Amount in Cases Involving a
Variety of Infringing Items.--In a case involving a variety of
infringing items, the infringement amount is the sum of all
calculations made for those items under subdivisions (A) and (B).
For example, if the defendant sold both counterfeit videotapes that
are identical in quality to the infringed videotapes and obviously
inferior counterfeit handbags, the infringement amount, for purposes
of subsection (b)(1), is the sum of the infringement amount
calculated with respect to the counterfeit videotapes under
subdivision (A)(i) (i.e., the quantity of the infringing videotapes
multiplied by the retail value of the infringed videotapes) and the
infringement amount calculated with respect to the counterfeit
handbags under subdivision (B) (i.e., the quantity of the infringing
handbags multiplied by the retail value of the infringing handbags).
(D) Determination of Retail Value.--For purposes of this
Application Note, the `retail value' of an infringed item or an
infringing item usually is the retail price of that item in the
market in which it is sold.
3. Pre-Release Infringement.--Subsection (b)(2) applies to the
distribution of an infringing item before the infringed item is
commercially released by the copyright or trademark owner. For
example, if the defendant unlawfully videotaped a film at a movie
theater, then distributed copies of that videotape before lawful
copies of the film were commercially available in videotape form,
the enhancement will apply.
4. Manufacturing, Importing, and Uploading Enhancement.--With
respect to uploading, subsection (b)(5) applies only to uploading
with the intent to enable other persons to download or otherwise
copy, or have access to, the infringing item. For example, this
subsection applies in the case of illegally uploading copyrighted
software to an Internet site, but it does not apply in the case of
downloading or installing that software on a hard drive on the
defendant's personal computer.
5. Application of Sec. 3B1.3.--If the defendant engaged in de-
encryption or circumvented some other technological security measure
in order to gain initial access to an infringed item, an adjustment
under Sec. 3B1.3 (Abuse of Position of Trust or Use of Special
Skill) will apply.
Background: This guideline treats copyright and trademark
violations much like theft and fraud. Similar to the sentences for
theft and fraud offenses, the sentences for defendants convicted of
intellectual property offenses should reflect the nature and
magnitude of the pecuniary harm caused by their crimes. Accordingly,
similar to the loss enhancement in the theft and fraud guidelines,
the infringement amount in subsection (b)(1) serves as a principal
factor in determining the offense level for intellectual property
offenses.
Subsection (b)(1) implements section 2(g) of the No Electronic
Theft (NET) Act by using the retail value of the infringed items,
multiplied by the number of infringing items, to determine the
pecuniary harm for cases in which use of the retail value of the
infringed item is a reasonable estimate of that harm. For cases
referred to in Application Note 2(B), the Commission determined that
use of the retail value of the infringed item would overstate the
pecuniary harm or otherwise be impracticable or inappropriate. In
these types of cases, use of the retail value of the
[[Page 72133]]
infringing item, multiplied by the number of those items, is a more
reasonable estimate of the resulting pecuniary harm.
Section 2511 of title 18, United States Code, as amended by the
Electronic Communications Act of 1986, prohibits the interception of
satellite transmission for purposes of direct or indirect commercial
advantage or private financial gain. Such violations are similar to
copyright offenses and are therefore covered by this guideline.
Issue for Comment: The Commission has bracketed specific offense
characteristics (b)(2) through (b)(6) in Option 3 to indicate that any
or all of these factors, or any combination thereof, could form the
basis for an enhancement. The Commission specifically invites comments
on which, if any, of these specific offense characteristics, or
combination of these specific offense characteristics, should be
incorporated into the guideline. The Commission also specifically
invites comment on whether, if the Commission were to adopt either
Option 1 or Option 2, any or all of these specific offense
characteristics, or any combination of these specific offense
characteristics, should be incorporated into the adopted Option.
The Commission also invites comment on whether, as an alternative
to proposed specific offense characteristics (b)(2) through (b)(6), the
factors which form the bases for those specific offense characteristics
should be expressed as bases for departure from the guideline range.
Proposed Re-Promulgation as Permanent Guideline Amendment
2. Synopsis of Proposed Amendment: This amendment proposes to re-
promulgate as a permanent amendment the emergency telemarketing fraud
amendment adopted by the Commission on September 23, 1998. It
implements the directives to the Commission in section 6 of the
Telemarketing Fraud Prevention Act of 1998, Pub. L. 105-184 (the
``Act''), but in a somewhat broader form than that required by the
directives.
The Act directs the Commission to provide for ``substantially
increased penalties'' for telemarketing fraud offenses. It also more
specifically requires that the guidelines provide ``an additional
appropriate sentencing enhancement, if the offense involved
sophisticated means, including but not limited to sophisticated
concealment efforts, such as perpetrating the offense from outside the
United States,'' and ``an additional appropriate sentencing enhancement
for cases in which a large number of vulnerable victims, including but
not limited to [telemarketing fraud victims over age 55], are affected
by a fraudulent scheme or schemes.''
This amendment responds to the directives by building upon the
amendments to the fraud guideline, Sec. 2F1.1, that were submitted to
Congress on May 1, 1998. (See Amendment 577 in USSC Guidelines Manual,
Appendix C Supplement.) The May 1, 1998 amendments added a specific
offense characteristic for ``mass-marketing.'' Under that amendment,
the definition of ``mass-marketing'' would include, but not be limited
to, telemarketing fraud. The May 1, 1998 amendments also added a
specific offense characteristic for sophisticated concealment.
This amendment broadens the ``sophisticated concealment''
enhancement to cover ``sophisticated means'' of executing or concealing
a fraud offense. In addition, the amendment increases the enhancement
under the vulnerable victim guideline, Sec. 3A1.1, for offenses that
impact a large number of vulnerable victims.
In designing enhancements that may apply more broadly than the
Act's above-stated directives minimally require, the Commission acts
consistently with other directives in the Act (e.g., section 6(c)(4)
(requiring the Commission to ensure that its implementing amendments
are reasonably consistent with other relevant directives to the
Commission and other parts of the sentencing guidelines)) and with its
basic mandate in sections 991 and 994 of title 28, United States Code
(e.g., 28 U.S.C. 991(b)(1)(B) (requiring sentencing policies that avoid
unwarranted disparities among similarly situated defendants)).
Proposed Amendment: Amendment 587 (See USSC Guidelines Manual, App.
C Supplement; see also 63 FR 55912 (1998)) is re-promulgated without
change as follows:
Section 2F1.1(b), as amended by amendment 577, is further amended
by striking subdivision (3) and all that follows through the end of the
subsection and inserting the following:
``(3) If the offense was committed through mass-marketing, increase
by 2 levels.
(4) If the offense involved (A) a misrepresentation that the
defendant was acting on behalf of a charitable, educational, religious
or political organization, or a government agency; or (B) violation of
any judicial or administrative order, injunction, decree, or process
not addressed elsewhere in the guidelines, increase by 2 levels. If the
resulting offense level is less than level 10, increase to level 10.
(5) If (A) the defendant relocated, or participated in relocating,
a fraudulent scheme to another jurisdiction to evade law enforcement or
regulatory officials; (B) a substantial part of a fraudulent scheme was
committed from outside the United States; or (C) the offense otherwise
involved sophisticated means, increase by 2 levels. If the resulting
offense level is less than level 12, increase to level 12.
(6) If the offense involved (A) the conscious or reckless risk of
serious bodily injury; or (B) possession of a dangerous weapon
(including a firearm) in connection with the offense, increase by 2
levels. If the resulting offense level is less than level 13, increase
to level 13.
(7) If the offense--
(A) Substantially jeopardized the safety and soundness of a
financial institution; or
(B) Affected a financial institution and the defendant derived more
than $1,000,000 in gross receipts from the offense,
increase by 4 levels. If the resulting offense level is less than level
24, increase to level 24.''.
The Commentary to Sec. 2F1.1 captioned ``Application Notes'', as
amended by amendment 577, is further amended by striking Application
Note 14 and all that follows through the end of the Application Notes
and inserting the following:
``15. For purposes of subsection (b)(5)(B), `United States' means
each of the 50 states, the District of Columbia, the Commonwealth of
Puerto Rico, the United States Virgin Islands, Guam, the Northern
Mariana Islands, and American Samoa.
For purposes of subsection (b)(5)(C), `sophisticated means' means
especially complex or especially intricate offense conduct pertaining
to the execution or concealment of an offense. For example, in a
telemarketing scheme, locating the main office of the scheme in one
jurisdiction but locating soliciting operations in another jurisdiction
would ordinarily indicate sophisticated means. Conduct such as hiding
assets or transactions, or both, through the use of fictitious
entities, corporate shells, or offshore bank accounts also ordinarily
would indicate sophisticated means.
The enhancement for sophisticated means under subsection (b)(5)(C)
requires conduct that is significantly more complex or intricate than
the conduct that may form the basis for an enhancement for more than
minimal planning under subsection (b)(2)(A).
If the conduct that forms the basis for an enhancement under
subsection (b)(5) is the only conduct that forms the basis for an
adjustment under Sec. 3C1.1
[[Page 72134]]
(Obstruction of Justice), do not apply an adjustment under Sec. 3C1.1.
16. `Financial institution,' as used in this guideline, is defined
to include any institution described in 18 U.S.C. 20, 656, 657, 1005-
1007, and 1014; any state or foreign bank, trust company, credit union,
insurance company, investment company, mutual fund, savings (building
and loan) association, union or employee pension fund; any health,
medical or hospital insurance association; brokers and dealers
registered, or required to be registered, with the Securities and
Exchange Commission; futures commodity merchants and commodity pool
operators registered, or required to be registered, with the Commodity
Futures Trading Commission; and any similar entity, whether or not
insured by the federal government. `Union or employee pension fund' and
`any health, medical, or hospital insurance association,' as used
above, primarily include large pension funds that serve many
individuals (e.g., pension funds of large national and international
organizations, unions, and corporations doing substantial interstate
business), and associations that undertake to provide pension,
disability, or other benefits (e.g., medical or hospitalization
insurance) to large numbers of persons.
17. An offense shall be deemed to have `substantially jeopardized
the safety and soundness of a financial institution' if, as a
consequence of the offense, the institution became insolvent;
substantially reduced benefits to pensioners or insureds; was unable on
demand to refund fully any deposit, payment, or investment; was so
depleted of its assets as to be forced to merge with another
institution in order to continue active operations; or was placed in
substantial jeopardy of any of the above.
18. `The defendant derived more than $1,000,000 in gross receipts
from the offense,' as used in subsection (b)(7)(B), generally means
that the gross receipts to the defendant individually, rather than to
all participants, exceeded $1,000,000. `Gross receipts from the
offense' includes all property, real or personal, tangible or
intangible, which is obtained directly or indirectly as a result of
such offense. See 18 U.S.C. 982(a)(4).
19. If the defendant is convicted under 18 U.S.C. 225 (relating to
a continuing financial crimes enterprise), the offense level is that
applicable to the underlying series of offenses comprising the
`continuing financial crimes enterprise.'
20. If subsection (b)(7)(A) or (B) applies, there shall be a
rebuttable presumption that the offense involved `more than minimal
planning.' ''.
The Commentary to Sec. 2F1.1 captioned ``Application Notes'', as
amended by amendment 577, is further amended by redesignating Notes 3
through 13 as Notes 4 through 14, respectively; and by inserting after
Note 2 the following new Note 3:
``3. `Mass-marketing,' as used in subsection (b)(3), means a plan,
program, promotion, or campaign that is conducted through solicitation
by telephone, mail, the Internet, or other means to induce a large
number of persons to (A) purchase goods or services; (B) participate in
a contest or sweepstakes; or (C) invest for financial profit. The
enhancement would apply, for example, if the defendant conducted or
participated in a telemarketing campaign that solicited a large number
of individuals to purchase fraudulent life insurance policies.''.
The Commentary to Sec. 2F1.1 captioned ``Application Notes'' is
amended in Note 1 by striking ``Sec. 2F1.1(b)(3)'' and inserting
``Sec. 2F1.1(b)(4)''; in redesignated Note 5 (formerly Note 4), by
striking ``(b)(3)(A)'' and inserting ``(b)(4)(A)''; and in redesignated
Note 6 (formerly Note 5), by striking ``(b)(3)(B)'' and inserting
``(b)(4)(B)''.
The Commentary to Sec. 2F1.1 captioned ``Background'' is amended by
inserting after the fifth paragraph the following new paragraph:
``Subsection (b)(5) implements, in a broader form, the instruction
to the Commission in section 6(c)(2) of Public Law 105-184.''.
Section 3A1.1 is amended by striking subsection (b) in its entirety
and inserting:
``(b)(1) If the defendant knew or should have known that a victim
of the offense was a vulnerable victim, increase by 2 levels.
(2) If (A) subdivision (1) applies; and (B) the offense involved a
large number of vulnerable victims, increase the offense level
determined under subdivision (1) by 2 additional levels.''.
The Commentary to Sec. 3A1.1 captioned ``Application Notes'' is
amended in Note 2 in the first paragraph by striking `` `victim'
includes any person'' before ``who is'' and inserting `` `vulnerable
victim' means a person (A)''; and by inserting after ``(Relevant
Conduct)'' the following:
``; and (B) who is unusually vulnerable due to age, physical or mental
condition, or who is otherwise particularly susceptible to the criminal
conduct''.
The Commentary to Sec. 3A1.1 captioned ``Application Notes'' is
amended in Note 2 in the second paragraph by striking ``where'' each
place it appears and inserting ``in which''.
The Commentary to Sec. 3A1.1 captioned ``Application Notes'' is
amended in Note 2 in the third paragraph by striking ``offense
guideline specifically incorporates this factor'' and inserting
``factor that makes the person a vulnerable victim is incorporated in
the offense guideline''.
The Commentary to Sec. 3A1.1 captioned ``Background'' is amended by
adding at the end the following additional paragraph:
``Subsection (b)(2) implements, in a broader form, the instruction
to the Commission in section 6(c)(3) of Public Law 105-184.''.
The Commentary to Sec. 2B5.1 captioned ``Application Notes'' is
amended in Note 1 by inserting ``United States'' before ``Virgin
Islands''.
[FR Doc. 99-33380 Filed 12-22-99; 8:45 am]
BILLING CODE 2210-40-P; 2211-01-P
