Criminal Copyright Conviction Overturned

A federal appeals court vacated the criminal copyright infringement conviction of the CEO of a DVD-manufacturing company because jury instructions failed to say trafficking in counterfeit labels must be “willful.”

Julius Liu’s conviction and four-year prison sentence on three counts of infringement were vacated Tuesday by the 9th U.S. Circuit Court of Appeals.  In addition, the court ordered dismissal of one count because the defense lawyer failed to raise a statute of limitations defense.

In 2000, Lui founded Super DVD, a DVD-manufacturing company with four replication machines in Hayward, Calif.

Replication companies such as Liu’s process orders from customers who are typically the publishers, or who purport to be the publishers, of the works, according to the court.

During a 2003 investigation in Florida, federal agents recovered counterfeit copies of Symantec software and shipping labels from more than 50 vendors, including Super DVD.

An agent posed as a potential lessee of Super DVD’s facilities and allegedly saw a room filled with spindles of CDs.  A search of Super DVD recovered thousands of DVDs and CDs of rap and Latin music compilations, as well as copies of the popular film Crouching Tiger, Hidden Dragon.

Lui did not have permission from the copyright holders to replicate the works, the opinion states.  He admitted Super DVD manufactured the Crouching Tiger DVDs but said the company that placed the order later refused to pay and Liu discovered they did not have rights to duplicate the movie.  He later filed a lawsuit against the firm and sought $85,000 in payment and claimed in the lawsuit he had been deceived about copyrights.

At the end of the three-day trial, retired Judge James Ware made changes to the jury instructions, including the definition of “knowingly.”

He changed an instruction that said the government had to prove Liu “knowingly trafficked in counterfeit labels” to say an act is “done ‘knowingly’ if the defendant is aware of the act and does not act through ignorance, mistake or accident.”

The appeals court said Ware failed to include an instruction that proof is needed of “willful copyright infringement.”

“There is no indication that the district court distributed a copy of the finalized jury instructions to counsel at that or any other time until just before instructing the jury,” said Judge Jacqueline Nguyen.

She said the panel concluded the district court was wrong to define willfulness so that the jury could convict Liu without finding that he knew his actions were illegal.

Judges John Noonan and Raymond Fisher joined the opinion.

Case:  U.S. v. Liu, No. 10-10613




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