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Elements of a Prosecution and Applicable Defenses

To convict a defendant of criminal copyright infringement, the government must prove, beyond a reasonable doubt, all of the following elements:

  1. A valid copyright exists.

  2. It was infringed.

  3. The infringement was willful.

  4. Either a) the infringement was for commercial advantage or private financial gain, or b) the infringed works' retail value exceeded statutory thresholds.21

Element 1: Valid Copyright

The government must demonstrate the existence of a valid copyright. Although copyright protection technically attaches when a work is created, the work's copyright must be registered before the work can support a prosecution.22 If made within five years of the work's publication, registration is prima facie evidence that the copyright is valid.23 Even without such a presumption, most warez are derived from works that should have no problem qualifying for copyright protection. As a result, this factor rarely will be relevant in a warez trading case.

Element 2: Infringement

A copyrighted work can be infringed, among other ways, through unauthorized reproduction or distribution. Uploading warez to Usenet, IRC, a web site, or anywhere else where it can be downloaded should constitute both reproduction (making a copy from a local computer to the file server) and distribution (when received by downloaders).24 Downloading a file25 and executing the file on a local computer26 should each constitute a reproduction of the file.

While the reproduction and distribution of warez is generally easy to demonstrate, the government often has some difficulty connecting those activities to a particular defendant. There are several ways the government can try to make that connection, but no method is foolproof:27

  • The government can show infringing activity associated with a username and password, but a defendant can claim that the username and password were stolen or shared.

  • The government can show infringing activity associated with an IP address, but the government then must further show that the defendant was using this IP address at the applicable time.

  • The government can obtain witness testimony that the defendant committed the infringing acts, but there are rarely "eyewitnessed" accounts of warez trading. However, even if they did not specifically see the defendant engaged in infringement, other group members often can offer damaging testimony.28

  • The government can obtain evidence from the defendant's computers, although defendants who encrypt or purge data can make this process more difficult.

  • The government can try to prove infringement circumstantially. However, the government generally tries to avoid warez trading prosecutions based solely on circumstantial evidence.

Government-operated or -infiltrated file servers or web sites give the government the best opportunity to obtain credible proof connecting a warez trader with infringing activity. This method is obviously difficult for the government, but it has been used successfully in, among others, the Fastlane and Operation Bandwidth (Rogue Warriorz) investigations.

Warez distributors and collectors can try to minimize liability for distribution by requiring the government to show that an uploaded file was actually downloaded.29 However, an infringing distribution can occur merely by making a copy available for distribution.30 Further, this defense does not negate liability for copying the file during the upload process.

The First Sale doctrine, which allows redistribution of a legitimately acquired physical copy of a copyrighted work,31 is a common defense in physical-space criminal copyright cases. However, it offers little help to warez traders because the doctrine applies only to physical copies (not electronic ones)32 and negates only distribution (not reproduction) liability.33

Finally, warez traders will often try to defend against infringement liability by claiming fair use. Fair use is a multi-factor test designed to balance the relatively absolute nature of a copyright monopoly with the social benefits accruing from limited uses of those copyrighted works. These are the factors:

  • Purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes

  • Nature of the copyrighted work

  • Amount and substantiality of the portion used in relation to the copyrighted work as a whole

  • Effect of the use upon the potential market for or value of the copyrighted work34

Because fair use is an equitable defense, courts routinely craft their analyses to support the result they think is appropriate. As a consequence, a fair use defense is highly unpredictable.

Nevertheless, we can make some educated guesses about how courts might apply the factors to warez trading. For example, the second and third factors will usually weigh against a warez trader. The types of files made into warez (software, music, movies) are generally close to copyright's core, and warez traders usually make a complete (or near-complete) copy of each traded work.

The first factor can be a little harder to apply. By definition, warez traders don't infringe for profit. Some commentators have suggested that noncommercial infringement presumptively should be considered fair use,35 which would make noncommercial warez trading immune from prosecution.

However, the NET Act redefined "financial gain" to include the receipt or expectation of receipt of copyrighted works. Under this definition, many warez traders technically infringe for "financial gain."36 Thus, in United States v. Slater, a warez trader argued that warez trading was noncommercial because traders didn't pay to download,37 but the Seventh Circuit soundly rejected this argument, observing that it "barely pass[es] the straight-face test."38 The court said warez trading was a form of barter: The trader contributes valuable services to the warez group in exchange for access to commercially available software.39

Alternatively, the Ninth Circuit in Napster said that P2P file-sharers infringed for commercial purposes because "repeated and exploitative" copying for personal benefit meant that the users could avoid purchasing legitimate copies.40 If P2P file traders make "repeated and exploitative" copies, warez traders do too.

In some cases, the court will bypass the commercial-educational spectrum and instead weigh the first factor in favor of fair use when the copy is "transformative," meaning that it "adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message."41 Although a warez copy may not be identical (due to the removal of copy protection devices, the addition of .nfo files, etc.), these changes don't "transform" the work into something different. However, some courts have found transformative uses based solely on the resulting work having a different purpose, even if nothing new is added.42 In this approach, warez could have different purposes when they're used for evaluation purposes or as trophies. Nevertheless, unless a court uses a liberal transformative interpretation, warez traders are unlikely to have the first fair use factor weigh in their favor.

The fourth factor is generally regarded as the most important fair use factor,43 so a warez trader can go a long way toward establishing a fair use defense if the trader can convince the fact-finder that warez trading doesn't detrimentally affect the copyright owner's market. This argument is not completely farfetched; many warez distributors and collectors never use the warez they trade or archive, and certainly they would never purchase those works.44 Thus, a collector who just downloads warez could try to argue that those activities don't affect the market adversely.

Justifying uploading/distribution under the fourth factor is more difficult. A warez trader could argue that most downloads are made by other warez traders, cycling warez through a group of people who would never buy them. However, some downloaders do use warez as a substitute for the original, in which case those copies could constitute lost sales. Further, some commercial pirates use warez sites as a source of new inventory.45 Even though warez traders usually object strongly to commercial piracy, warez distribution can facilitate commercial piracy and thus detrimentally affect the market for traded works. As a result, many courts will not weigh the fourth factor in favor of warez trading defendants.46

Given the nature of their commodity, abandonware traders may have a little more luck on the fourth factor. By definition, abandonware doesn't hurt a market that the copyright owner has stopped pursuing. However, some courts protect a copyright owner's choice not to exploit a market,47 and in those cases even the abandonware trader will find little relief under fair use.

Putting aside the technical analysis of the fair use factors, there is little reason to believe that warez trading constitutes fair use. Warez trading is not the type of socially beneficial behavior that fair use was intended to encourage, so courts are not likely to interpret the defense broadly to help out warez traders. As the Seventh Circuit harshly stated in Slater, "It is preposterous to think that [warez trading] is authorized by virtue of the fair use doctrine."48

Element 3: Willfulness

The government has the burden to prove that the defendant's conduct was willful. Willfulness is "a word of many meanings whose construction is often dependent on the context in which it appears."49 In the criminal copyright infringement context, the word's meaning remains unresolved.

Two different standards are used to define "willfulness." The minority view says that willfulness requires the government to prove only that the defendant had the intent to copy.50 Under this position, warez trading is willful by definition. However, this position has been heavily criticized,51 and the language added to Section 506(a)(2) by the NET Act ("evidence of reproduction or distribution of a copyrighted work, by itself, shall not be sufficient to establish willful infringement") may have ended any credible argument that the minority position applies to criminal copyright infringement.52

The majority view says that willfulness requires the government to prove that the defendant specifically intended to infringe such that the infringement was a voluntary, intentional violation of a known legal duty.53 This view enables several additional defenses:

  • The defendant (incorrectly) believed in good faith that he or she didn't infringe because the original and copy are dissimilar or because of the First Sale doctrine.54 This defense offers limited hope to warez traders. As discussed earlier, the First Sale doctrine doesn't apply to electronic copies, and warez are usually duplicates of the originals. Rarely will these questions be debatable enough to allow a court to conclude that the belief was reasonable.

  • The defendant (incorrectly) believed in good faith that the use was fair.55 Although the fair use question could be just debatable enough to support a good faith belief, the Seventh Circuit's Slater opinion (characterizing the fair use defense as "preposterous") suggests otherwise.

  • The defendant didn't know the law.56 Criminal copyright infringement laws are technical and opaque, so understandably many warez traders don't understand how their behavior violates the law. However, the defense may apply only if the defendant didn't know the laws applicable to civil infringement. Warez traders generally know that they're infringing. In fact, committing infringement is a key objective—no reputable warez trader wants to distribute or collect files (such as public domain material or open source software) that are freely available to everyone. Because most warez traders know they're doing something wrong, this defense will likely fail.

While the majority view of willfulness imposes a reasonably high standard on the government, warez trading is probably willful under either the majority or minority views.

Element 4a: Commercial Advantage or Private Financial Gain

To prosecute under Section 506(a)(1), the government must prove that the infringement was made for commercial advantage or private financial gain. The post–NET Act definition of "financial gain" covers the "receipt, or expectation of receipt, of anything of value, including the receipt of other copyrighted works."57 Thus, to the extent that a warez trader barters copyrighted works (implicitly or explicitly), that activity can be characterized as being for financial gain. Although warez traders often trade hundreds or even thousands of copyrighted works, even a single barter suffices.

Some warez traders assert that they trade warez without any expectation of return.58 Even in these cases, the government may respond that the warez trader's need to maintain a reputation for distributing new warez creates an implicit expectation of return.

Element 4b: Retail Value of Infringed Works

A felony conviction under Section 506(a)(1) requires the government to prove that the defendant reproduced or distributed copyrighted works with a retail value of at least $2,500.59 Alternatively, prosecutions under Section 506(a)(2) require the government to prove that the defendant, in any 180-day period, reproduced or distributed copyrighted works with a retail value over $2,500 for felony prosecutions60 or $1,000 for misdemeanors.61

Copyrighted works have a wide range of retail values, ranging from the manufacturer's list price to the "street" price to the price paid for an infringing copy (which, for warez, is zero). So how is retail value determined? The statute intentionally doesn't define the term.62 While this omission seems problematic, courts will likely consider the Sentencing Guidelines' definition of retail value. That definition sets up a shifting standard for determining retail value: The default is the price paid for the infringing copies,63 but the value shifts to the retail value of legitimate copies in (among others) the following circumstances:

  • The infringing item is identical or substantially equivalent to the infringed item, or is a digital or electronic reproduction.

  • The infringing item's retail value is difficult or impossible to calculate without unduly complicating or prolonging the proceedings.

  • The infringed item's retail value more accurately assesses the pecuniary harm suffered by the owner.64

Based on these factors (especially the first), the retail value used in warez trading cases invariably should be the retail value of legitimate copies.65 Thus, warez traders should generate high values of infringed works. Indeed, many DrinkOrDie defendants stipulated to infringing works with retail value of between $2,500,000 and $5,000,000, and the judge set the retail value for the Pirates With Attitude ("PWA") defendants at $1,424,640.

In reality, the actual retail value of the copyrighted works infringed by those defendants probably vastly exceeded those amounts. Retail value computations are suppressed by the government's evidentiary challenge of connecting infringing copies with defendants.66 Even so, with high dollar values attached to the most attractive warez, most warez traders should easily clear the $2,500 felony standard.67

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