The Hacker's Encyclopedia 1998/hackers_encyclopedia.iso/zines/cud/cud701.txt

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Computer underground Digest    Sat  Jan 7, 1995   Volume 7 : Issue 01
                           ISSN  1004-042X

       Editors: Jim Thomas and Gordon Meyer ([e-mail])
       Archivist: Brendan Kehoe
       Retiring Shadow Archivist: Stanton McCandlish
       Shadow-Archivists: Dan Carosone / Paul Southworth
                          Ralph Sims / Jyrki Kuoppala
                          Ian Dickinson
       Copy Reader:       Laslo Toth

CONTENTS, #7.01 (Sat, Jan 7, 1995)

File 1--Govt. Response to Lamacchia
File 2--Judge Stearns' Decision in Lamacchia Case Dismissal
File 3--EFF Personnel Changes Announced
File 4--EFF Personnel Changes, II
File 5--Cu Digest Header Info (unchanged since 25 Nov 1994)

CuD ADMINISTRATIVE, EDITORIAL, AND SUBSCRIPTION INFORMATION APPEARS IN
THE CONCLUDING FILE AT THE END OF EACH ISSUE.

----------------------------------------------------------------------

Date: Thu, 29 Dec 1994 17:31:00 EST
From: Dave Banisar <[e-mail]>
Subject: File 1--Govt. Response to Lamacchia

((MODERATORS' NOTE: CuD readers will recall that David Lamacchia was
indicted last year for alleged acts of "piracy" stemming from
allegations that he made copyright software available over the
Internet through an MIT computer (see CuD 6.31, 6.32).  Critics of the
prosecution argued that the charges, based on wire fraud, did not
match the alleged crime. As the following two articles indicate, the
judge agreed.))

       STATEMENT OF MASSACHUSETTS U.S. ATTORNEY DONALD K. STERN
                 REGARDING THE DAVID LA MACCHIA CASE

  BOSTON, Dec. 29 /PRNewswire/ -- The following is a statement from
U.S. Attorney Donald K. Stern concerning the Davd La Macchia case:

    "Judge Stearns has granted the motion of David La Macchia to
dismiss the indictment brought against him.  Judge Stearns held that
La Macchia's prosecution for conspiracy to violate the federal wire
fraud statute could not go forward.  The judge's thoughtful decision
deserves further study before we decide whether to appeal it to the
First Circuit."

    "At the same time, the Judge stated that the objective of this
prosecution 'is a laudable one' and he further observed that, 'if the
allegations in the indictment are accurate, La Macchia's actions were
at best...heedlessly irresponsible, and at worst...nihilistic,
self-indulgent, and lacking in any fundamental sense of values.'"

    "Large scale software piracy remains a serious problem.  While we
believe this indictment to be legally sound and may well appeal, the
Court's decision suggests that Congress should re-visit this area.

  While it will not have any impact on this case, I intend to raise
with the Department of Justice whether it should file legislation
explicitly dealing with willful, multiple infringements of copyrighted
software, in order to remove any uncertainties."

  /CONTACT:  Joy Fallon or Kathleen Griffin of the U.S. Attorney's
Office, 617-223-9445/

------------------------------

Date: Sat, 7 Jan 1995 21:34:01 -0600
From: [e-mail](Jim Thomas)
Subject: File 2--Judge Stearns' Decision in Lamacchia Case Dismissal

(MODERATORS' NOTE: The following text was made available by Mike
Godwin of EFF, and posted on The Well)).

      UNITED STATES DISTRICT COURT
       DISTRICT OF MASSACHUSETTS

    CRIMINAL ACTION NO. 9410092-RGS

        UNITED STATES OF AMERICA

   v.

    DAVID LaMACCHIA

    MEMORANDUM OF DECISION AND ORDER
    ON DEFENDANT'S MOTION TO DISMISS

   December 28, 1994

 STEARNS, D.J.

 This case presents the issue of whether new wine can be poured into an
 old bottle. The facts, as seen in the light most favorable to the
 government, are these. The defendant, David LaMacchia, is a twenty-one
 year old student at the Massachusetts Institute of Technology (MIT).
 LaMacchia, a computer hacker, used MIT's computer network to gain
 entree to the Internet.  Using pseudonyms and an encrypted address,
 LaMacchia set up an electronic bulletin board which he named Cynosure.
 [fn 1] He encouraged his correspondents to upload popular software
 applications (Excel 5.0 and WordPerfect 6.0) and computer games (Sim
 City 2000). These he transferred to a second encrypted address
 (Cynosure II) where they could be downloaded by other users with
 access to the Cynosure password. Although LaMacchia was at pains to
 impress the need for circumspection on the part of his subscribers,
 the worldwide traffic generated by the offer of free software
 attracted the notice of university and federal authorities.

 On April 7, 1994, a federal grand jury returned a one count indictment
 charging LaMacchia with conspiring with "persons unknown" to violate
 18 U.S.C. Sec. 1343, the wire fraud statute.  According to the
 indictment, LaMacchia devised a scheme to defraud that had as its
 object the facilitation "on an international scale" of the "illegal
 copying and distribution of copyrighted software" without payment of
 licensing fees and royalties to software manufacturers and vendors.
 The indictment alleges that LaMacchia's scheme caused losses of more
 than one million dollars to software copyright holders. The indictment
 does not allege that LaMacchia sought or derived any personal benefit
 from the scheme to defraud.

 On September 30, 1994. the defendant brought a motion to dismiss,
 arguing that the government had improperly resorted to the wire fraud
 statute as a copyright enforcement tool in defiance of the Supreme
 Court's decision in Dowling v. United States, 473 U.S. 207 (1985) The
 government argues that Dowling is a narrower case than LaMacchia would
 have it, and holds only that copyright infringement does not satisfy
 the physical "taking" requirement of the National Stolen Property Act,
 18 U.S.C. Sec. 2314.

  THE DOWLING DECISION

 Paul Edmond Dowling was convicted of conspiracy, interstate
 transportation of stolen property [ITSP], copyright violations and
 mail fraud in the Central District of California. Dowling and his
 co-conspirators sold bootleg Elvis Presley recordings by soliciting
 catalogue orders from post office boxes in Glendale, California. The
 infringing recordings were shipped in interstate commerce to Maryland
 and Florida. The eight ITSP counts on which Dowling was convicted
 involved thousands of phonograph albums.  "[E]ach album contained
 performances of copyrighted musical compositions for the use of which
 no licenses had been obtained nor royalties paid ...." Dowling, supra
 at 212.  Dowling appealed his convictions (except those involving
 copyright infringement) The Ninth Circuit Court of Appeals affirmed.
 "[T]he [Ninth Circuit] reasoned that the rights of copyright owners in
 their protected property were indistinguishable from ownership
 interests in other types of property and were equally deserving of
 protection under the [stolen property] statute." Id.

 The Supreme Court granted certiorari only as to Dowling's convictions
 for interstate transportation of stolen property [fn 2].  The Court, in
 an opinion by Justice Blackmun, held that a copyrighted musical
 composition impressed on a bootleg phonograph record is not property
 that is "stolen, converted, or taken by fraud" within the meaning of
 the Stolen Property Act.  Justice Blackmun emphasized that cases
 prosecuted under Sec. 2314 had traditionally involved "physical
 'goods, wares [or] merchandise.'" The statute "seems clearly to
 contemplate a physical identity between the items unlawfully obtained
 and those eventually transported, and hence some prior physical taking
 of the subject goods" Id at 216. In Dowling's case there was no
 evidence "that Dowling wrongfully came by the phonorecords actually
 shipped or the physical materials from which they were made." Dowling,
 supra at 214.

 Justice Blackmun felt compelled, however, to answer the government's
 argument that the unauthorized use of the underlying musical
 compositions was itself sufficient to render the offending
 phonorecords property "stolen, converted or taken by fraud."

    [T]he Government's theory here would make theft, conversion, or fraud
    equivalent to wrongful appropriation of statutorily protected rights in
   copyright. The copyright owner, however, holds no ordinary chattel. A
    copyright, like other intellectual property, comprises a series of
    carefully defined and carefully delimited interests to which the law
    affords correspondingly exact protections. Id. at 216.

 A copyright, as Justice Blackmun explained, is unlike an ordinary
 chattel because the holder does not acquire exclusive dominion over
 the thing owned. The limited nature of the property interest conferred
 by copyright stems from an overriding First Amendment concern for the
 free dissemination of ideas. "The primary objective of copyright is
 not to reward the labor of authors. but '[t]o promote the Progress of
 Science and useful Arts.' Art. I, Sec. 8, cl. 8." Feist Publications,
 Inc. v. Rural Telephone Service Co., 499 U.S. 340, 349 (1991).  Data
 general Corp. v. Grumman Systems Support, 36 F.3d 1147, 1187 (1st Cir.
 1994) (same).  Justice Blackmun offered the "fair use" doctrine (17
 U.S.C. Sec. 107) and the statutory scheme of compulsory licensing of
 musical compositions (17 U.S.C. Sec. 115) as examples of ways in which
 the property rights of a copyright holder are circumscribed by the
 Copyright Act [fn 3]. Dowling, supra at 217.

    It follows that interference with copyright does not easily equate
    with theft, conversion or fraud. The Copyright Act even employs a
    separate term of art to define one who misappropriates a copyright:
    "Anyone who violates any of the exclusive rights of the copyright
    owner," that is, anyone who trespasses into his exclusive domain by
    using or authorizing the use of the copyrighted work in one of the
    five ways set forth in the statute, "is an infringer of the
    copyright." There is no dispute in this case that Dowling's
    unauthorized inclusion on his bootleg albums of performances of
    copyrighted compositions constituted infringement of those copyrights.
    It is less clear, however, that the taking that occurs when an
    infringer arrogates the use of another's protected work comfortably
    fits the terms associated with physical removal employed by Sec. 2314.
    The infringer invades a statutorily defined province guaranteed to the
    copyright holder alone. But he does not assume physical control over
    the copyright; nor does he wholly deprive its owner of its use. While
    one may colloquially like infringement with some general notion of
    wrongful appropriation, infringement plainly implicates a more complex
    set of property interests than does run-of-the-mill theft, conversion
    or fraud. As a result, it fits but awkwardly with the language
    Congress chose - "stolen, converted or taken by fraud" - to describe
    the sorts of goods whose interstate shipment Sec. 2314 makes criminal.
    Id at 217-218 (citations omited).

 The ITSP statute, Justice Blackmun observed, had its roots in efforts
 by Congress to supplement the efforts of state authorities frustrated
 by jurisdictional problems arising from the transportation of stolen
 property across state lines. Id. at 219-220.

    No such need for supplemental federal action has ever existed,
    however, with respect to copyright infringement, for the obvious
    reason that Congress always has had the bestowed authority to
    legislate directly in this area.... Given that power, it is
    implausible to suppose that Congress intended to combat the problem of
    copyright infringement by the circuitous route hypothesized by the
    government . . . In sum, the premise of Sec. 2314 -- the need to fill
    with federal action an enforcement chasm created by limited state
    jurisdiction -- simply does not apply to the conduct the Government
    seeks to reach here.  Id at 220-221.

 A review of the evolution of criminal penalties in the Copyright Act
 led Justice Blackmun to observe that:

    "[T]he history of the criminal infringement provisions of the
    Copyright Act reveals a good deal of care on Congress' part before
    subjecting copyright infringement to serious criminal penalties.... In
    stark contrast, the Government's theory of this case presupposes a
    congressional decision to bring the felony provisions of Sec. 2314,
    which make available the comparatively light fine of not more than
    $10,000 but the relatively harsh term of imprisonment of up to 10
    years, to bear on the distribution of a sufficient quantity of any
    infringing goods simply because of the presence here of a
    factor-interstate transportation-not otherwise though relevant to
    copyright law. The Government thereby presumes congressional adoption
    of an indirect but blunderbuss solution to a problem treated with
    precision when considered directly. Id. at 225-226.

 Finally, noting that the government's expansive reading of the Stolen
 Property Act would have the unsettling effect of criminalizing a broad
 range of conduct involving copyright and other intellectual property
 that had been historically regulated by the civil laws, Justice
 Blackmun concluded that "the deliberation with which Congress over the
 last decade has addressed the problem of copyright infringement for
 profit, as well as the precision with which it has chosen to apply
 criminal penalties in this area, demonstrates anew the wisdom of
 leaving it to the legislature to define crime and prescribe penalties.
 Here, the language of Sec. 2314 does not 'plainly and unmistakably'
 cover petitioner Dowling's conduct" Id at 228 (footnote omitted).
 Dowling's ITSP convictions were reversed.

   THE COPYRIGHT LAW

 Article 1, Sec. 8, cl. 8 of the U S Constitution grants Congress the
 exclusive power "[t]o promote the Progress of Science and useful Arts,
 by securing for limited Times to Authors and Inventors the exclusive
 Right to their respective writings and Discoveries."  Thus "[t]he
 remedies for infringement 'are only those prescribed by Congress.'"
 Sony Corporation of America v. Universal City Studios, Inc., 464 U.S.
 417, 431 (1984) (quoting Thompson v. Hubbard, 131 U.S. 123, 151
 (1889)). Since 1897, when criminal copyright infringement was first
 introduced into U.S. copyright law, [fn 4] the concept differentiating
 criminal from civil copyright violations has been that the
 infringement must be pursued for purposes of commercial exploitation.

 Until 1909, "[t]he crime of copyright infringement was . . . limited
 to unlawful performances and representation of copyrighted dramatic
 and musical compositions."  Saunders, Criminal Copyright Infringement
 and the Copyright Felony Act, 71 Denv. U.L.  Rev. 671, 673 (1994). The
 1897 Act defined the mens rea  of criminal copyright
 infringement as conduct that is "willfull" and undertaken "for
 profit," a definition that remained unaltered until the general
 revision of the Copyright Act in 1976.

 In 1909, the Copyright Act was revised to extend misdemeanor criminal
 sanctions to infringement of all copyrighted material with the
 exception of sound recordings.  Copyright Act of 1909, ch. 320, 33
 stat 1075-1082. The 1909 amendments also made criminal the knowing and
 willful aiding and abetting of another's infringing activities.
 Performers and producers of musical recordings were not protected under
 the 1909 Act, and composers were given the exclusive rights to license
 only the first recording of their musical works. After that, a
 compulsory licensing provision allowed anyone to record and distribute
 the work so long as a two cent per copy royalty was paid to the
 original composer. Id, Subsec. 1(e), 25(e).

 The framework set out by the 1909 Act remained in effect until 1971,
 when the growth of the recording industry following the musical
 revolution of the 1960's brought the problem of unauthorized
 reproduction and sale of musical works to Congress' attention. See
 H.R. Rep. No. 487, 92d Cong. 1st Sess. 2 (1971). In response, Congress
 passed the Sound Recording Act of 1971, which addressed the perceived
 flaw in the 1909 Act by granting sound recordings full copyright
 protection, including criminal penalties for profit motivated
 infringement. In 1976, Congress revamped the Copyright Act by
 eliminating the crime of aiding and abetting copyright infringement.
 It also eased the mens rea  requirement for criminal copyright
 infringement by eliminating the burden of proving that an infringer
 acted "for profit," requiring instead only that the infringement be
 conducted "willfully and for purposes of commercial advantage or
 private financial gain." 17 U.S.C. Sec. 506(a). Criminal infringement
 under the 1976 Act was a misdemeanor except in the case of repeat
 offenders (who could be sentenced to a maximum of two years and a fine
 of $50,000).

 After lobbying by the Motion Picture Association and the Recording
 Industry Association, Congress increased the penalties for criminal
 infringement in 1982. Act of May 24, 1982. Pub. L. No. 97-180. 97th
 Cong. 2d Sess., 96 Stat. 91. Certain types of first-time criminal
 infringement were punishable as felonies depending on the time period
 involved and the number of copies reproduced or distributed. [fn 5]
 See 18 U.S.C. Sec. 2319.  The mens rea  element, however,
 remained unchanged, requiring proof of "commercial advantage or
 private financial gain."  17 U.S.C. Sec. 506(a). Most criminal
 infringements remained misdemeanor offenses despite the new penalty
 structure.

 In the decade following the 1982 revisions to the Copyright Act, the
 home computing and software industry underwent a period of explosive
 growth paralleling the expansion in the 1960's and 1970's of the
 recording and motion picture industries. In 1992, the Software
 Publishers Association reported in testimony to the Subcommittee on
 Intellectual Property and Judicial Administration of the House Committee
 on the Judiciary that software manufacturers were losing $2.4 billion in
 revenues annually as a result of software piracy. "Rather than adopting
 a piecemeal approach to copyright legislation and simply adding computer
 programs to audiovisual works, and sound recordings to the list of works
 whose infringement can give rise to felony penalties under [18 U.S.C.]
 Sec. 2319," Congress passed the Copyright Felony Act. [fn 6] Saunders,
 supra, at 680. The Act amended Sec. 2319 by extending its felony
 provision to the criminal infringement of all copyrighted works
 including computer software. [fn 7] The mens rea  for criminal
 infringement remained unchanged, requiring prosecutors to prove that the
 defendant infringed a copyright "willfully and for purpose of commercial
 advantage or private financial gain." 17 U.S.C. Sec. 506(a). [fn 8]

        DISCUSSION

 The wire fraud statute, 18 U.S.C. Sec. 1343 was enacted in 1952. In its
 entirety, the statute reads as follows:

    Whoever, having devised or intending to devise any scheme or artifice
 to
    defraud, or for obtaining money or property by means of false or
    fraudulent pretenses, representations, or promises, transmits or causes
   to be transmitted by means of wire, radio, or television communication
    in interstate or foreign commerce, any writings, signs, signals,
    pictures, or sounds for the purpose of executing such scheme or
 artifice,
    shall be fined not more than $1,000 or imprisoned not more than five
    years, or both. If the violation affects a financial institution, such
    person shall be fined not more than $1,000,000 or imprisoned not more
    than 30 years, or both.

 The wire fraud statute was enacted to cure a jurisdictional defect that
 Congress perceived was created by the growth of radio and television as
 commercial media. In its report to the House of Representatives, the
 Committee on the Judiciary explained:

    [T]he measure in amended form. . .creates a new. but relatively
 isolated
    area of criminal conduct consisting of the execution of a scheme to
    defraud or to obtain money or property by means of false or fraudulent
    pretenses, representations, or promises transmitted in writings, signs,
   pictures, or sounds via interstate wire or radio communications (which
    includes the medium of television). . . The rapid growth of interstate
    communications facilities, particularly those of radio and television,
    has given rise to a variety of fraudulent activities on the part of
    unscrupulous persons which are not within the reach of existing mail
    fraud laws, but which are carried out in complete reliance upon the use
   of wire and radio facilities and without resort to the mails.... Even in
   those cases of radio fraud where the mails have played a role, it is
    sometimes difficult to prove the use of the mails to the satisfaction
 of
    the court, and so prosecutions often fail.  Because of the greater
    facility in proving the use of radio, this bill if enacted might often
    rescue a prosecution which would otherwise be defeated on
    technicalities.

 H.R. Rep. No. 388, 82d Cong., 1st Sess. 102 (1951).

 As the legislative history makes clear, the wire fraud statute was
 intended to complement the mail fraud statute by giving federal
 prosecutors jurisdiction over frauds involving the use of interstate (or
 foreign) wire transmissions. [fn 9] Thus what can be prosecuted as a
 scheme to defraud under the mail fraud statute (18 U.S.C. Sec. 1341) is
 equally susceptible to punishment under Sec. 1343 so long as the
 jurisdictional element is met. Carpenter v. United States. 484 U.S. 19,
 25 n.6 (1987). McEvoy Travel Bureau, Inc. v. Heritage Travel, Inc. 904
 F.2d 786, 791 n.8 (1st Cir. 1990). The concomitancy of the two statutes
 underlies the government's argument that significance should be read
 into the fact that the limited grant of certiorari in Dowling left
 Dowling's convictions for mail fraud undisturbed.

 A scheme to defraud is the defining concept of the mail and wire fraud
 statutes.  Because of the conjunctive use of the word "or" in the
 statutory phrase "any scheme or artifice to defraud, or for obtaining
 money or property by false or fraudulent pretenses, representations, or
 promises." the federal courts (encouraged by prosecutors) have
 essentially bifurcated mail and wire fraud into two separate offenses;
 the first, the devising of a scheme to defraud, the second, the devising
 of a scheme to obtain money or property by false pretenses.  While the
 latter crime comports with common law notions of fraud, "[t]he phrase,
 'a scheme to defraud' came to prohibit a plan, that is, to forbid a
 state of mind, rather than physical conduct." Moohr, Mail Fraud and the
 Intangible Rights Doctrine: Someone to Watch Over Us, 31 Harv. J. on
 Legis. 153, 161 (1994).

 The incarnation of mail fraud as an inchoate crime has its most
 celebrated expression in federal prosecutions of state and local public
 officials accused of depriving citizens of their intangible right to
 honest public service in violation of their fiduciary duty to disclose
 conflicts of interest. [fn 10] See United States v. Mandel, 591 F.2d
 1347, 1360-1362 (4th Cir. 1979). Because of the so-called "intangible
 rights doctrine," mail fraud and its sister offense, wire fraud, have
 become the federal prosecutor's weapon of choice. "Mail fraud . . . has
 been expanded to the point that a fiduciary, agent, or employee commits
 an offense when, through a material deception or a failure to disclose,
 a beneficiary, principal or employer suffers even an intangible,
 constructed detriment." Moohr, supra, 31 Harv. J. On Legis. at 163. Wire
 fraud offers an especially pleasing feature from the government's
 perspective that is particularly relevant to LaMacchia's case. Unlike
 the criminal copyright statute, 17 U.S.C. Sec. 506(a), the mail and wire
 fraud statutes do not require that a defendant be shown to have sought
 to personally profit from the scheme to defraud. See United States v.
 Silvano, 812 F.2d 754, 759-760 (1st Cir. 1987).

 While it is true, as LaMacchia contends, that the denial of a writ of
 certiorari "imports no expression upon the merits of the case," United
 States v. Carver, 260 U.S.  482, 490 (1923), the more interesting issue
 is whether the Ninth Circuit's mail fraud analysis (the significant
 portions of which the Supreme Court left intact) is applicable to the
 facts of his case.

 Dowling brought himself within the orbit of the mail fraud statute by
 mailing catalogues advertising his bootleg phonograph records. So, too,
 the government argues, LaMacchia subjected himself to the wire fraud
 statute by advertising infringing software via computer transmissions.
 The government in Dowling (as here) did not argue any more than
 jurisdictional significance for Dowling's mailings, that is, the
 mailings themselves did not make any false or misleading
 representations. They did, however, serve as an obvious means of
 furthering Dowling's scheme to defraud. See Schmuck v. United States, 489
 U.S. 705. 710-711 (1989).

 The Ninth Circuit nonetheless focused on the fact that Dowling had
 "concealed his activities from the copyright holders with the intent to
 deprive them of their royalties."  739 F.2d at 1449. "It is settled in
 this Circuit that a scheme to defraud need not be an active
 misrepresentation. A nondisclosure or concealment may serve as a basis
 for the fraudulent scheme." Id. at 1448.  See also United States v.
 Silvano, supra, 812 F.2d at 759 (same). The Ninth Circult rejected
 Dowling's argument that non-disclosure can serve as the basis of a
 scheme to defraud only when a defendant has a fiduciary duty to make an
 affirmative disclosure. It also rejected the government's contention
 that "the presence of illegal conduct alone may constitute the basis of
 the 'fraud' element." 739 F.2d at 1449. "Rather, we conclude that a
 non-disclosure can only serve as a basis for a fraudulent scheme when
 there exists an independent duty that has been breached by the person so
 charged." Id. This duty, the Ninth Circuit noted, could be fiduciary in
 nature, or it could "derive from an independent explicit statutory duty
 created by legislative enactment." Id.  In Dowling's case, the duty
 located by the Ninth Circuit was the duty implicit in the compulsory
 licensing scheme of the Copyright Act, 17 U.S.C. Sec. 115, which
 requires vendors to notify copyright owners of the intention to
 manufacture and distribute infringing records.

    In conclusion, we stress that the narrowness of our holding permits
    nondisclosures to form the basis of a scheme to defraud only when there
   exists an independent duty (either fiduciary or derived from an explicit
   and independent statutory requirement) and such a duty has been
    breached.  To hold otherwise that illegal conduct alone may constitute
    the basis of the fraud element of a mail fraud conviction would have
 the
    potential of bringing almost any illegal act within the province of the
   mail fraud statute.

 739 F.2d at 1450.

 The difficulties in applying the Ninth Circuit's Dowling analysis to
 support a wire fraud prosecution in LaMacchia's case are three.  First,
 no fiduciary relationship existed between LaMacchia and the
 manufacturers whose software copyrights he allegedly infringed. Second,
 there is no independent statutory duty of disclosure like the one that
 snared Dowling because there is no software equivalent to the compulsory
 licensing scheme. [fn 11] Third, even were I to accept the argument made
 by the government in Dowling, that illegal conduct alone may suffice to
 satisfy the fraud element of [Sec. 1343], the holding would not cover
 LaMacchia's case for the simple reason that what LaMacchia is alleged to
 have done is not criminal conduct under Sec. 506(a) of the Copyright
 Act. [fn 12]

 The government's second and more plausible argument relies on the
 unobjectionable proposition "that [the] enactment of particularized
 federal interest statutes does not oust a more general interstate
 commerce statute from application."  Government's Memorandum at 11.  The
 government cites a number of areas of specialized federal law where the
 mail and wire fraud statutes have been held to remain viable enforcement
 tools.  This same argument, however, did not impress Justice Blackmun in
 Dowling, as none of the cases cited there (as here) "involved copyright
 law specifically or intellectual property in general." Dowling, supra at
 218 n.8. [fn 13] The government also points to 18 U.S C. Sec. 2319(a),
 which provides that "[w]hoever violates section 506(a). . . of title 17
 shall be punished as provided in subsection (b) of this section and such
 penalties shall be in addition to any other provisions of title 17 or
 any other law."  The government emphasizes the last four words of the
 statute without apparently noticing the first four.  LaMacchia is not
 alleged to have violated section 506(a).  See also Dowling, supra at 225
 n.18 ("In the absence of and such indication [that Congress intended to
 approve the use of Sec. 2314 in a copyright prosecution], we decline to
 read the general language appended to Sec. 2319(a) impliedly to validate
 extension of Sec. 2314 in a manner otherwise unsupported by its language
 and purpose").  Finally, the government cites Carpenter v. United
 States, 484 U.S 19 (1987), which holds that intangible as well as
 tangible property interests are protected by the mail and wire fraud
 statutes.  "Absolutely nothing in Carpenter," the government argues,
 "distinguishes intangible right to copy, distribute and license computer
 software from other intangible property interests...." Government's
 Memorandum at 13.  But see United States v. Riggs, 739 F. Supp. 414,
 422-423 (N.D. Ill.  1990) ("As Dowling . . .  recognized, the copyright
 holder owns only a bundle of intangible rights which can be infringed,
 but not stolen or converted.  The owner of confidential, proprietary
 business information, in contrast, possesses something which has clearly
 been recognized as an item of property").

 The issue thus is whether the "bundle of rights" conferred by copyright
 is unique and distinguishable from the indisputably broad range of
 property interests protected by the mail and wire fraud statutes.  I
 find it difficult, if not impossible, to read Dowling as saying anything
 but that it is. [fn 14] "A copyright, like other intellectual property,
 comprises a series of carefully defined and carefully delimited
 interests to which the law affords correspondingly exact protections."
 Dowling, supra at 216. If, as the government contends, Dowling stands
 for nothing more than the proposition that one cannot equate copyright
 infringement with a "physical taking" for purposes of the Stolen
 Property Act, [fn 15] it is difficult to explain why Justice Blackmun
 devoted the bulk of his opinion to the issue of "whether the history and
 purpose of Sec. 2314 evince a plain congressional intention to reach
 interstate shipments of goods infringing copyrights." Dowling supra at
 218. [fn 16] Nor can one explain why the same analysis should not be
 applied to the mail and wire fraud statutes, which like the Stolen
 Property Act, were enacted to fill enforcement gaps in state and federal
 law. Why is it not true of mail and wire fraud, as it is of ITSP, that
 "[n]o such need for supplemental federal action has ever existed ....
 for the obvious reason that Congress always has had the bestowed
 authority to legislate directly in this area [of copyright
 infringement]"? Dowling supra at 220. Finally, why would not the
 government's position here produce the same pernicious result that
 Justice Blackmun warned of in Dowling, of permitting the government to
 subvert the carefully calculated penalties of the Copyright Act by
 selectively bringing some prosecutions under the more generous penalties
 of the mail and wire fraud statutes? [fn 17]

 What the government is seeking to do is to punish conduct that
 reasonable people might agree deserves the sanctions of the criminal
 law.  But as Justice Blackmun observed in Dowling, copyright is an area
 in which Congress has chosen to tread cautiously, relying "chiefly . . .
 on an array of civil remedies to provide copyright holders protection
 against infringement," while mandating "studiously graded penalties" in
 those instances where Congress has concluded that the deterrent effect
 of criminal sanctions are required. Dowling, supra at 221, 225. "This
 step-by-step, carefully considered approach is consistent with Congress'
 traditional sensitivity to the special concerns implicated by the
 copyright laws." Id at 225. Indeed, the responsiveness of Congress to
 the impact of new technology on the law of copyright limned earlier in
 this opinion, confirms Justice Blackmun's conviction of "the wisdom of
 leaving it to the legislature to define crime and prescribe penalties"
 Dowling, supra at 228.

    "The judiciary's reluctance to expand the protections afforded by the
    copyright without explicit legislative guidance is a recurring theme.
    Sound policy, as well as history, supports our consistent deference to
    Congress when major technological innovations alter the market for
    copyrighted materials. Congress has the institutional authority and the
   institutional ability to accommodate fully the varied permutations of
    competing interests that are inevitably implicated by such new
    technology."

 Sony Corporation of America v. Universal City Studios, Inc., 464 U.S.
 417, 431 (1984) (citations omitted).

 While the government's objective is a laudable one, particularly when the
 facts alleged in this case are considered, its interpretation of the
 wire fraud statute would serve to criminalize the conduct of not only
 persons like LaMacchia, but also the myriad of home computer users who
 succumb to the temptation to copy even a single software program for
 private use.  It is not clear that making criminals of a large number of
 consumers of computer software is a result that even the software
 industry would consider desirable. [fn 18]

 In sum, I agree with Professor Nimmer that:

    The Dowling decision establishes that Congress has finely calibrated
 the
    reach of criminal liability [in the Copyright Act], and therefore
 absent
    clear indication of Congressional intent, the criminal laws of the
    United States do not reach copyright-related conduct.  Thus copyright
    prosecutions should be limited to Section 506 of the Act, and other
    incidental statutes that explicitly refer to copyright and copyrighted
    works.

 3 Nimmer on Copyright, Sec. 15.05 at 15-20 (1993).  See also 2
 Goldstein, Copyright, Sec. 11.4.2.2 at 304 n. 67 (1989) ("[A]lthough the
 Court did not directly rule on whether the mail fraud statute
 encompassed the infringing conduct, its reasoning with respect to the
 Stolen Property Act, 18 U.S.C. Sec. 2314, suggests that it would have
 treated the mail fraud statute similarly.")

 Accordingly, I rule that the decision of the Supreme Court in Dowling v.
 United States precludes LaMacchia's prosecution for criminal copyright
 infringement under the wire fraud statute. [fn 19]

 This is not, of course, to suggest that there is anything edifying about
 what LaMacchia is alleged to have done. If the indictment is to be
 believed, one might at best describe his actions as heedlessly
 irresponsible. and at worst as nihilistic, self-indulgent, and lacking
 in any fundamental sense of values. Criminal as well as civil penalties
 should probably attach to willful, multiple infringements of copyrighted
 software even absent a commercial motive on the part of the infringer.
 One can envision ways that the copyright law could be modified to permit
 such prosecution. But, "'[i]t is the legislature, not the Court which is
 to define a crime, and ordain its punishment.'" Dowling, supra at 214
 (quoting United States v. Wiltberger, 5 Wheat. 76, 95 (1820)).

  ORDER

 For the foregoing reasons, defendant LaMacchia's motion to dismiss is
 ALLOWED.

 SO ORDERED.

 [signed, Richard G. Stearns]

 United States District Judge





        Footnotes
        ---------

 [1] The allusion is presumably to the North Star, a faithful
 astronomical reference point for mariners.


 [2] The Court observed a split among the Circuits concerning the
 applicability of 18 U.S.C. Sec. 2314 to the interstate transportation
 of infringing articles.

 [3] Another example is the finite duration of a copyright. See 17
 U.S.C. Sec. 302.

 [4] Act of January 6, 1897. ch 4. 29 Stat. 481--482.

 [5] While the offense of criminal copyright infringement remained
 defined by 17 U.S.C.  Sec. 506(a), the penalties were moved to a new
 freestanding statute, 18 U.S.C. Sec. 2319.

 [6] Pub. L. No. 102-561 [S. 893] (October 28, 1992) (enacted after
 amendment). This is not to say that Congress had been inattentive to the
 needs of the emerging software industry. In 1980, Congress added
 "computer program" to the list of definitions of works protected under
 the copyright statute See 17 U.S.C. Sec. 101. The Computer Software
 Rental Amendments Act of 1990 gave further protection to holders of
 software copyrights, although declining to subject violators to the
 criminal penalties of 17 U.S.C.  Sec. 506 and 18 U.S.C. Sec. 2319. See
 17 U.S.C. Sec. 109(b)(4).

 [7] The Report that accompanied the Senate version of the bill declared
 that "[t]he only defense against [software] piracy is the
 copyright law." S. Rep. No. 268. 102d Cong., 2d Sess. (1992) (emphasis
 added)

 [8] As Senator Hatch, the Senate sponsor of the Act noted, "the copying
 must be undertaken to make money, and even incidental financial benefits
 that might accrue as a result of the copying should not contravene the
 law where the achievement of those benefits [was] not the motivation
 behind the copying." 138 Cong. Rec. S. 17958-17959 (October 8, 1992).

 [9] The "interstate" limitation was inserted into the statute both out
 of jurisdictional concerns and to "avoid intrusion on the police power
 of the States." H.R. Rep. No. 388, supra, at 3. The police power of the
 States, of course, does not extend to the regulation of copyright,
 leading one to doubt, as defendant points out, that the statute was
 enacted to supplement state efforts to police copyright infringement.
 Defendant's Memorandum at 18.

 [10] The origins and contours of the intangible rights doctrine (and the
 short-lived effort of the Supreme Court to reground the mail fraud
 statute in traditional concepts of property, see McNally v. United
 States, 483 U.S. 350 (1987)) are capably portrayed in Moohr, supra, 31
 Harv. J. on Legis at 158-170. The doctrine has been applied with similar
 effect to schemes rising in a commercial context. See United States v.
 George, 477 F.2d 508 (7th Cir. 1973) (commercial kickbacks, employee's
 duty to disclose).

 [11] In Cooper v. United States, 639 F Supp. 176, 180 (M.D. Fla. 1986),
 cited by the government, the petitioners did not raise the sufficiency
 of the allegation of a scheme to defraud, but rather the possibility
 that the jury might have perceived the interstate transportation of the
 pirated cassette tapes as the gravamen of the scheme, a theory
 indisputably precluded by the Supreme Court's Dowling decision.

 [12] I do not believe that the Ninth Circuit's mail fraud analysis
 survives Dowling in any event, as I will explain. Dowling, I note, did
 not contest his conviction for criminal violations of Sec. 506(a) of the
 Copyright Act.

 [13] The suggestion that the felony provisions of the wire fraud statute
 were enacted with the punishment of copyright infringement in mind in
 somewhat difficult to accept when one remembers that in 1952 the
 Copyright Act authorized only misdemeanor prosecutions, a circumstance
 that continued until 1982.  Equally difficult to accept is the idea that
 Congress has in some fashion acquiesced by silence to the utilization of
 mail and wire fraud as copyright enforcement tools. One need only
 contrast the infrequent and, with exception of the Congressional
 reaction to McNally, technical amendments to the mail and wire fraud
 statutes with Congress' exhaustive attention to developments affecting
 copyright law.

 [14] The government strenuously disagrees with me on this point.
 However, even the dissenters in Dowling (Justice Powell and White) saw
 the issue framed by the majority no differently than I do. As Justice
 Powell characterizes the opinion: "The Court holds today that 18 U.S.C.
 Sec, 2314 does not apply to this case because the rights of a copyright
 holder are `different' from the rights of owners of other kinds of
 property." Dowling, supra at 22 (Powell, J., dissenting)

 [15] See Government's Memorandum at 8.

 [16] The government's suggestion "that the legislative history of
 copyright protection serves only to provide additional reason to
 hesitate before extending Sec. 2314 to cover the interstate shipments in
 this case'." and that Dowling simply held that "'Congress has not spoken
 with the requisite clarity.'" seem to me equally applicable to the
 analysis of Sec. 1343. Government's Memorandum at 8 (quoting Dowling,
 supra at 221, 229).

 [17] For example, a first offender who reproduces fewer than ten copies
 of a computer software program in a one hundred and eighty day period is
 subject to a maximum punishment of one year imprisonment 18 U.S.C. Sec.
 2314(b)(3). The same prosecution under the wire fraud statute would
 entail a maximum prison sentence of five years. As defendant also notes,
 use of the wire fraud statute to punish criminal copyright infringement
 would override the shorter three year statute of limitations of the
 Copyright Act.

 [18] In 1992, in hearings before the House Judiciary Subcommittee on
 Intellectual Property and Judicial Administration, the Vice-President
 and General Counsel of the Computer & Communications Industry
 Association testified as follows: "There are millions of people with
 personal computers to make copies. That is exactly one of the reasons I
 think you want to be very careful. You do not want to be accidentally
 taking a large percentage of the American people, either small business
 or citizens, into the gray area of criminal law." Hearing on S. 893
 (August 12, 1992) at p. 65.

 [19] The issue presented in this case is one of infringement only.
 Infringement is a technical concept describing interference with the
 statutorily defined rights of a copyright holder. A scheme or artifice
 to defraud, the object of which was to fraudulently obtain possession of
 the copyright itself would, I believe, be clearly punishable under the
 mail and wire fraud statutes. See Dowling, supra at 217 ("[The
 infringer] does not assume physical control over the copyright, nor does
 he wholly deprive the owner of its use").

------------------------------

Date: Thu, 22 Dec 1994 18:44:08 -0500 (EST)
From: Stanton McCandlish <[e-mail]>
Subject: File 3--EFF Personnel Changes Announced

FOR IMMEDIATE RELEASE

Personnel Announcements at EFF.
Contact: EFF: Andrew Taubman <[e-mail]>, [phone]

The Electronic Frontier Foundation (EFF) announced today several
significant personnel changes. EFF is a non-profit, public interest
organization that seeks to protect and enhance the growth of "Cyberspace"
(the Global Information Infrastructure) as a diverse, free, responsible and
empowering environment.

David Johnson has been named Chair of the EFF Board of Directors and Senior
Policy Fellow of EFF. Johnson, an EFF Board member since 1993, has been
practicing computer law with the Washington, DC, law firm of Wilmer,
Cutler & Pickering. He has direct experience with computer networks  as
Chairman of LEXIS Counsel Connect (an on-line system for lawyers). He joins
Andrew Taubman, Executive Director and Chief Operating Officer, who began
at EFF in September  of 1994.

Esther Dyson has been named Vice-Chair and will serve on the EFF Executive
Committee. Dyson is President of EDventure Holdings Inc., a venture
capital firm focused on emerging  information technologies, particularly in
Eastern Europe. Dyson is a member of the US National Information
Infrastructure Advisory Council, has board memberships at the Global
Business Network, Perot Systems, the Santa Fe Institute, and is a founding
member of the Software  Publishers Association.

Johnson and Dyson join David J. Farber and Rob Glaser on the EFF
Executive Committee. Farber holds the Alfred Fitler Moore Professorship
of Telecommunications at the University of Pennsylvania, is a fellow at the
Annenberg School for Public Policy and at the Glocom Institute in Japan and
was one of the creators of many of the parts that evolved into the modern
Internet - such as CSNet, CREN, and NSFNet.  Glaser is President and CEO of
Progressive Networks, an interactive media and services company and serves
on such boards as the Foundation for National Programs and the Washington
Public Affairs Network.

EFF co-founders Mitchell Kapor (immediate past Chair) and John Perry Barlow
(immediate past Vice-Chair) remain Directors and will continue to
participate actively in the development and implementation of EFF policy
programs.

Also announced, Jerry Berman, who held the position of Policy Director, has
left EFF. Janlori Goldman and Daniel Weitzner, who have worked closely
with Mr. Berman over the years, and other policy staff members, also have
left to establish with Mr. Berman a new organization to be called the
Center for Democracy and Technology (CDT). EFF wishes CDT success in its
new venture and thanks Jerry and his colleagues for their substantial
contributions over the past three years.

In 1995, EFF will continue to pursue its policy mission of protecting the
health and growth of the global computer networks. The 1995 policy agenda
includes such projects as an innovative new "State of the Net" report;
studies of the implications of the global nature of the net for
jurisdictional and governance questions; a study of the protection of
intellectual property on networks; and efforts to preserve the free
flow of information across the Global Information Infrastructure. EFF
expects to continue to intervene actively to counter threats to
computer-mediated commmuniations networks, and virtual communities, such
as limitations on the use of cryptography and intrusions into personal
privacy, as it has in previous years.

------------------------------

Date: Tue, 20 Dec 1994 17:01:12  (PST)
From: CyberWire Dispatch <[e-mail]>
Subject: File 4--EFF Personnel Changes, II

CyberWire Dispatch // Copyright (c) 1994 //

Jacking in from the "Back to the Future" Port:

Washington, DC -- The Electronic Frontier Foundation has fired its Policy
Director Jerry Berman and will soon release a sweeping new agenda for 1995
that promises to return the organization to its original grassroots
beginning.

Asked to comment on his firing, Berman bristles and says:  "I think that's
baloney." Then he quickly adds:  "Did you ever think I might have wanted to
leave?"

Berman has, in fact, left EFF, to head a new, as yet unannounced, policy
group called the Center for Democracy and Technology.  His departure from
EFF and the creation of CDT will be made public this week in a joint
announcement with EFF, sources said.  The official line that will be spun
to the public is that the two came to a "mutual parting of the ways."

That benign statement, however, doesn't reflect the long hours of the
behind the scenes deliberations, in which the language of the press
releases will be a cautiously worded as an official State Department
briefing.

Heroes and pioneers always take the arrows;  EFF lately has looked more
like a pin-cushion than its self-appointed role as protector of all things
Cyberspace.  The beleaguered organization has over the course of the past
two years endured often withering criticism from the very frontier citizens
it was sworn to uphold and protect.

The reason:  A perceived move away from its grassroots activism to the role
of a consummate Washington Insider deal maker.

Berman is the man largely responsible for cutting EFF's policy cloth.  He
wears the suit well.  Maybe too well.  Although he has the political acumen
to arm-wrestle inside-the-beltway, it comes at the expense of his
management style, EFF insiders said.  Those shortcomings came at the
expense of EFF's day-to-day operations and didn't go unnoticed by its board
of directors.

The EFF board in October fired Berman for mismanaging the group's
organizational and fiscal responsibilities.  No impropriety or malfeasance
was alleged, the board was simply dissatisfied with Berman's day-to-day
managing of the shop.

In a precursor to the board's October decision, it split Berman's job,
giving him charge of just the policy arm, which board members said played
to his strength.  They then hired Andrew Taubman as executive director to
oversee the day to day tasks.

Separate from the organizational and fiscal misgivings, the board also
couldn't brook with priority on policy affairs that Berman had engineered.
Although Berman expertly navigated EFF through the choppy political waters
of Washington, that course increasingly steered the organization away from
its original vision as a populist group.

Never was the hardcore policy-driven slant of EFF more apparent than during
the two-plus year political firestorm that surrounded the FBIs infamous
Digital Wiretap.

The political wrangling during that time, in which Berman brokered the
influence of EFF with the backing of the telephone, computer and software
industries, to reach a compromise with legislators and the FBI on the
bill's language, increasingly drove a wedge between the organization and
its grassroots membership.

Nobody within EFF interviewed for this article disagreed with how Berman
ran his policy tour de force.  In fact, the board was generally in
agreement that Berman did an excellent job in helping to broker a less
nefarious version of the FBI's wiretap bill than would have otherwise
passed without his involvement on EFF's behalf.

As effective as Berman was in shuffling between the political and
ideological interests of EFF and its members, the "inside baseball"
political bullshit was largely lost on the community of the Net, who viewed
it as a kind of betrayal.

The fact that there would be a backlash from the Net came as no surprise to
Berman and EFF, who recognized the fine line they had to walk in dealing
with a politically charged issue rivaled only by the Administration's
insipid Clipper Chip encryption policy.

You see, the Net community is a binary braintrust, a world of ones and
zeros -- either on or off -- in which shades of grey are rarely an option.
Yet it is exactly these shades of grey in which Berman excels and thrives.
It is a skill --  and damn near an art form -- to be able to move among the
shadows and Washington's land of a thousand different agendas.  And that's
right where Berman had steered EFF.

However, it's not where the EFF board thought the organization belonged.

And so, in a few days the Net community will read a grand announcement in
which EFF and Jerry Berman state they've had a "mutual parting of the
ways."    The announcement will be several fold, including:

-- The formation of  Berman's new Center for Democracy and Technology.

-- That EFF has hired current board member David Johnson, currently a
   computer law attorney with the Washington law firm of Wilmer, Cutler and
   Pickering, to be its new policy director, although that exact title has
   yet to be finalized.

-- A new policy agenda for EFF that includes creation of an annual "State
   of the Net" report.

EFF Executive Director Taubman declined to comment on Berman's firing,
saying only that the organization and its former director had, indeed,
agreed to a "mutual parting of the ways."    He said EFF and Berman's new
group would continue to work closely with each other and that the efforts
of each would be mutually beneficial.

Johnson said he was excited about the new policy efforts he would be
heading up for EFF, which, in addition to the "State of the Net" report,
includes commissioning papers and studies to help build a more solid idea
of what exactly constitutes the Net "community" on a global basis and
helping to define the Net's community as recognizable legal entity.

In addition to the new policy efforts, Johnson will have to restock EFF's
policy department:  All the EFF policy wonks have jumped ship, resigning
their positions and joining with Berman's new venture.

The upheaval at EFF -- which included moving the entire operation here to
new digs in Washington -- apparently hasn't hurt moral which has "never
been higher," Taubman said.

Underscoring Taubman's remarks is EFF's on-line legal council Mike Godwin,
who said the changes "create an opportunity for us to return to our more
populist mission and vision that we started with."


All Things Being Equal
=================

Adversity for a political junkie is the warp and woof  of  Washington
culture.  Berman is no worse for the wear, having parachuted out of EFF and
into his new organization. He said CDT will be differ from EFF "on what to
emphasize."  That emphasis will be to focus on "on the ground public
policy," he said.

And it won't only be Berman's staff that sets the scene for familiarity as
he jump starts CDT.  The former EFF policy staffers will supply him with
horsepower and his political currency will open doors.  But he needs cold
hard cash to feed the troops and pay the rent.

That means his new organization must have financial backing and here, too,
there are no strangers.  Berman's bringing along a fair chunk of EFF's
corporate sponsors to his new home.

Companies providing seed money to Berman's CDT include AT&T, Bell Atlantic,
Nynex, Apple Computer and Microsoft.  These same companies provided a
combined $235,000 in donations to EFF in 1993, minus Nynex, which wasn't
listed as a major donor (over $5,000) on EFF's tax returns.

It's not known if these companies will continue to fund EFF in full or in
part or what amount they have pledged to Berman's group.  Just how
well-heeled CDT is and exactly who makes up the full roster of its
sponsorship remains to be seen.  We'll know that after the organization
files its first tax returns, which will be a matter of public record.


Meeks out...

------------------------------

Date: Thu, 23 Oct 1994 22:51:01 CDT
From: CuD Moderators <[e-mail]>
Subject: File 5--Cu Digest Header Info (unchanged since 25 Nov 1994)

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