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DC Circuit Vacates Restitution Award in Criminal Copyright Infringement Case
Practical Law Legal Update 4-522-5196 (Approx. 3 pages)
DC Circuit Vacates Restitution Award in Criminal Copyright Infringement Case
by PLC Intellectual Property & Technology
| Published on 19 Nov 2012 • USA (National/Federal) |
In US v. Fair, the US Court of Appeals for the District of Columbia Circuit vacated the district court’s order directing Fair to pay $743,098.99 in restitution to Adobe Systems, Inc. for illegally selling pirated copies of Adobe software.
Key Litigated Issue
The key litigated issue in US v. Fair, was whether it was appropriate under the Mandatory Victim Restitution Act (MVRA) for the district court to order Fair to pay restitution to Adobe in an amount equivalent to the revenue he received from selling Adobe’s pirated software.
Background
In US v. Fair, Fair pled guilty to criminal copyright infringement in violation of Section 506(a) of the Copyright Act and Section 2319 of Title 18 of the US Code for selling pirated copies of Photoshop, PageMaker and other Adobe software products. At sentencing and under the MVRA (18 U.S.C. § 3663A), the district court ordered Fair to pay restitution to Adobe in an amount equal to the total sales revenue he received from selling the pirated products. Fair appealed this order, arguing that the district court erred by basing the restitution order on the amount of his gain rather than Adobe’s loss.
Outcome
In its November 9, 2012 opinion, the US Court of Appeals for the District of Columbia Circuit determined that the district court abused its discretion in ordering Fair to pay restitution and vacated the restitution order. The DC Circuit, in line with the other circuits that have addressed this issue, clarified that the plain language of the MVRA requires that:
- A restitution order must require the defendant to either return the property or reimburse the victim for the victim's loss.
- Because the purpose of the MVRA is compensatory, that is, to restore a victim to the position the victim held before the injury, restitution under the act is limited to the victim’s actual, provable loss caused by the defendant.
- The government bears the burden of proving the victim’s loss by a preponderance of the evidence.
- A defendant’s gain is not, under ordinary circumstances, an appropriate measure of the victim’s actual loss.
The court further noted that in copyright infringement and fraudulent sales cases, the typical measure of the victim’s actual loss is the victim's lost profits resulting from the defendant’s infringing sales. Here, however, the government failed to submit any evidence that would allow the district court to determine:
- Adobe’s actual loss.
- Whether Fair’s gains represented profits Adobe would have otherwise gained.
The court, therefore, vacated the restitution order and rejected the government’s request to remand the case to the district court for submission of new evidence of Adobe’s actual loss.
Practical Implications
Victims of criminal copyright infringement should be aware that:
- Because restitution under the MVRA is limited to the victim’s actual loss, detailed records of loss of profits may be necessary to prove their entitlement to restitution in a criminal copyright infringement proceeding.
- They may still seek an accounting of the infringer's profits under Section 504(b) of the Copyright Act in a civil action.