Technology Law Column

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Published in the Chicago Daily Law Bulletin, January 12, 1995 at page 6.

Alleged Software Pirate Thwarts Prosecution

Copyright 1995 by David Loundy

David LaMacchia's generosity kept him out of jail. U.S. District Judge Stearns improved LaMacchia's prospects for a good New Year when, at the end of December, he found that LaMacchia's actions did not constitute wire fraud (United States v. LaMacchia, No. 9410092-RGS (D. Mass. Dec. 28, 1994) (Memorandum of Decision and Order on Defendant's Motion to Dismiss).

David LaMacchia is a student at the Massachusetts Institute of Technology. In his spare time he ran a bulletin board system (BBS), accessible over the Internet, from MIT's computer network. His BBS was used to solicit and distribute software. LaMacchia's legal problems stemmed from the fact that the software solicited was pirated, and he was generously offering to let his BBS users download copies of commercial software such as WordPerfect and Excel, free of charge, without the copyright holders being any the wiser.

The indictment alleges that his generosity amounted to the free distribution of more than one million dollars of the copyright holders' software. Even though Mr. LaMacchia tried to keep his activities quiet, according to Judge Stearns, "the worldwide traffic generated by the offer of free software attracted the notice of university and federal authorities."

The authorities' interest in David LaMacchia's activities resulted in an indictment - not for criminal copyright infringement - but rather for wire fraud. The government alleged that his allowing the transmission of software over a computer network constituted a "scheme or artifice to defraud, or for obtaining money or property by false or fraudulent pretenses, representations or promises."

The only problem with the government's analysis is that David LaMacchia did not try to deceive anyone and did not try to obtain any money or property through his actions. The LaMacchia court based its decision on the precedent set by the U.S. Supreme Court case Dowling v. United States (473 U.S. 207 (1985)).

At issue in Dowling was the transport through the mail of bootleg Elvis records. The government had accused Dowling of violating the mail fraud statute (18 U.S.C. Section 1341), after which the wire fraud statute (18 U.S.C. Section 1343) is modeled. The government claimed that the bootleg records constituted property "stolen, converted, or taken by fraud" as covered by the Interstate Transportation of Stolen Property Act (18 U.S.C. Section 2314). (The Stolen Property Act was attractive to prosecutors because it might provide for a felony conviction with a harsh prison term.)

In his decision, Justice Blackmun reasoned that copyrighted works were not tangible property of the sort normally covered by the Stolen Property Act. Because no transfer of the copyright had taken place, there had been no theft of the copyright, only an infringement of it. However, such infringements are clearly addressed by the Copyright Act and therefore, the government was not correct in trying to apply a "gap filler" statute, such as the Stolen Property Act, to cover the interstate sale of record albums that, while not stolen, contained unlawful recordings. Rather, the Stolen Property Act was meant to protect the owner of an item from being deprived of that item's possession - which had not occurred as a result of the creation and sale of the Elvis records.

Justice Blackmun illustrated his reasoning by pointing out that the Copyright Act applies the term of art "infringement" for such actions, instead of using the more common terms "theft", "conversion", or "fraud". Justice Blackmun reasoned that, because the Copyright Act clearly applied to Dowling's conduct and provided appropriate penalties for that conduct, it would be inappropriate to stretch another statute to cover actions clearly under the disposition of the Copyright Act merely because interstate transportation was involved. However, the recordings that were transported, while not amounting to theft, were subject to a mandatory licensing fee, which Dowling did not pay.

The Ninth Circuit, in the original Dowling case stated that the licensing section of the Copyright Act amounted to a statutorily created duty (possibly fiduciary in nature) on the part of anyone making copies requiring payment of the licensing fee. Dowling's attempt to "concea[l] his activities from the copyright holders with the intent to deprive them of their royalties" constituted a scheme to defraud, according to the Ninth Circuit, and thus the Copyright Act had been violated.

In LaMacchia's case, unlike in Dowling, no underlying fraud was found because computer software, while protected by the copyright law, is not subject to a licensing fee (unlike the records in Dowling). No concealment of unpaid royalties, no wire fraud.

The Government probably would have liked simply to put LaMacchia in jail for violating section 506(a) of Title 17, the criminal provision of the Copyright Act. But here is where Mr. LaMacchia's generosity saved him.

Under the Copyright Act and the Copyright Felony Act (amending 18 U.S.C. Section 2319), to find criminal infringement, the defendant must have infringed the copyright "willfully and for purpose of commercial advantage or private financial gain."

While LaMacchia was willful in setting up and running his pirate bulletin boards, he did not intend to profit by his actions. Thus, while he may be a software pirate, he is not a criminally-infringing one.

Judge Stearns lauded the government's attempts to find a way to put LaMacchia in jail for committing these acts; the same acts which would have been punishable had they been committed by someone who sought a profit. However, to allow an end run around the Copyright Act by using the Wire Fraud statute in this manner would allow criminal penalties of up to five years imprisonment for anyone who makes for personal use so much as a single copy of a protected program. Such a penalty would be steeper than the one specifically designed to address such a situation as provided by the Copyright Act. Such a penalty could also be applied to such a tremendous number of people that Judge Stearns was not sure that it was "clear that making criminals of a large number of consumers of computer software is a result that even the software industry would consider desirable."

Judge Stearns wrote that if the actions attributed to LaMacchia in the indictment are to believed, then LaMacchia's actions were "heedlessly irresponsible" at best, and "nihilistic, self-indulgent, and lacking in any fundamental sense of values" at worst.

LaMacchia's generosity in distributing software for free may have saved him from jail this time, but MicroSoft, Maxis, and the other holders of the copyrights on the pirated software may not be as beneficent as they respond to such situations. Nor may be the legislature as it re-examines the copyright law in light of the growing use of networked computer technology.

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