The Sentencing Guidelines and Intellectual Property Crimes

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The Sentencing Guidelines and Intellectual Property Crimes

The Sentencing Guidelines and Intellectual Property Crimes 

Most intellectual property offenses are calculated and sentenced under U.S.S.G. Sections 2B5.3 and 2B1.1. Section 2B5.3 covers most intellectual property offenses, including copyright, trademark, counterfeit, bootleg, camcording, and the unauthorized use of satellite, radio, and cable Communications. Section 2B1.1 covers offenses involving the Economic Espionage Act (EEA).

Section 2B5.3 | Most Intellectual Property Offenses

The base offense level under 2B5.3 is eight which, like all base offense levels, is designed to “reflect a minimal, general harm caused by the offense.”[1] Under U.S.S.G. § 2B5.3(b)(1), the base offense level is adjusted according to the “infringement amount,” an estimate of the magnitude of infringement.[2] The infringement amount is calculated by multiplying the retail value of the infringed item by the number of infringing items.[3] If the court cannot determine the number of infringing items, the court need only make a reasonable estimate of the infringement amount using any relevant information, including financial records.[4] “Infringed item” means the copyrighted or trademarked item with respect to which the crime against intellectual property was committed.[5] “Infringing item” means the item that violates the copyright or trademark laws.[6] The “retail value” of an infringed item or an infringing item is the retail price of that item in the market in which it is sold.[7] If the infringement amount is $2,500 or less, there is no offense level increase.[8]If the infringement amount exceeds $2,500 but is less than $6,500 the level increases by one.[9] In the case that the amount exceeds $6,500 the base level offense is increased by the number of levels from the table in Section.[10]

Section 2B1.1 | Offenses Involving the Economic Espionage Act (EEA)

U.S.S.G. § 2B1.1 is the primary applicable Guideline for the Economic Espionage Act, except for attempts and conspiracies.[11] The choice of U.S.S.G. § 2B1.1 instead of U.S.S.G. § 2B5.3 likely reflects the idea that EEA offenses are primarily about stolen property rather than infringement.[12] Subsection (b)(14) of U.S.S.G. § 2B1.1 addresses offenses involving the misappropriation of a trade secret when the defendant knew or intended either (A) that the trade secret would be transported or transmitted out of the United States, which results in an increase by two levels,[13] or (B) that the offense would benefit a foreign government, foreign instrumentality, or foreign agent, which results in an increase by four levels and sets a minimum resulting offense level of fourteen.[14] The defendant’s sentence in an EEA offense is largely calculated by the value of the lost property. Under U.S.S.G. § 2B1.1(b)(1) the offense level increases according to the amount of the loss. Regardless of how the court chooses to calculate loss, the court “need only make a reasonable estimate” and not be absolutely certain or precise.[15] The resulting loss figure is “the greater of actual loss or intended loss.”[16] “Actual loss” means the reasonably foreseeable pecuniary harm that resulted from the offense.[17] “Intended loss” means the pecuniary harm that the defendant purposely sought to inflict, and includes intended pecuniary harm that would have been impossible or unlikely to occur.[18] Loss calculations are often complicated and are only made more so by the fact that, by definition, trade secrets lack an open market price or value for the court to use as a reference or basis.[19] Given the variety of scenarios, the evidence available, and broad principles of valuing trade secrets, the DOJ recommends that prosecutors, agents, and courts be pragmatic about choosing which method to use so long as it is equitable, appropriately punitive, and supported by the evidence.[20]

[1] U.S.S.G. App. C (Amendments 590, 593).

[2] See § 2B5.3(b)(1).

[3] See U.S.S.G. § 2B5.3 cmt. n.2(A), (B).

[4] U.S.S.G. 2B5.3 (n.2(E)).

[5] U.S.S.G. 2B5.3(n. 1).

[6] Id.

[7] U.S.S.G. 2B5.3 (n.2(C)).

[8] Id. * § 2B5.3(b)(1).

[9] U.S.S.G. § 2B5.3(b)(1)(A).

[10] U.S.S.G. 2B5.3(b)(1)(B).

[11] An EEA attempt or conspiracy is sentenced under U.S.S.G. Section 2X1.1. 2B1.1 which uses 2B1.1’s basic calculation and then decreases the base offense level by three.

[12] OFFICE OF LEGAL EDUC., supra note 2, at 333.

[13] U.S.S.G. 2B1.1(b)(14)(A).

[14] U.S.S.G. 2B1.1(b)(14)(B)

[15] U.S.S.G. § 2B1.1 at n.3(C).

[16] U.S.S.G. 2B1.1 at n.3(A).

[17] Id. at cmt. n.3(A)(i); See also United States v. Wilkinson, 590 F.3d 259 at 268 (4th Cir. 2010).

[18] U.S.S.G. 2B1.1 at n.3(A)(ii).

[19] OFFICE OF LEGAL EDUC., supra note 2, at 333–35.

[20] Id.