BILL ANALYSIS Ó AB 1241 Page 1 Date of Hearing: April 28, 2015 Counsel: Sandra Uribe ASSEMBLY COMMITTEE ON PUBLIC SAFETY Bill Quirk, Chair AB 1241 (Calderon) - As Amended March 26, 2015 SUMMARY: Imposes a mandatory minimum fine of not less than $1,000 for a second or subsequent conviction for the crime of music or video piracy. EXISTING LAW: 1)Provides that a person is guilty of the failure to disclose the origin of a recording or audiovisual work (piracy) if, for commercial advantage or private financial gain, he or she knowingly advertises or offers for sale or resale, or sells or resells, or causes the rental, sale or resale, or rents, or manufactures, or possesses for these purposes, any recording or audiovisual work, the outside cover, box, jacket, or label of which does not clearly and conspicuously disclose the actual true name and address of the manufacturer thereof and the name of the actual author, artist, performer, producer, programmer, or group thereon. (Pen. Code, § 653w, subd. (a)(1).) 2)Provides that if the offense involves at least 100 articles of audio recordings or audiovisual works, or the commercial equivalent thereof, then the punishment is imprisonment in a county jail not to exceed one year, by imprisonment pursuant AB 1241 Page 2 to criminal justice realignment for two, three, or five years, by a fine not to exceed $500,000, or by both that fine and imprisonment. (Pen. Code, § 653w, subd. (b)(1).) 3)Punishes any other first-time violation of the crime by imprisonment in a county jail not to exceed one year, by a fine of not more than $50,000, or by both that fine and imprisonment. (Pen. Code, § 653w, subd. (b)(2).) 4)Punishes a second or subsequent conviction by imprisonment in a county jail not to exceed one year, or by imprisonment pursuant to criminal justice realignment, by a fine not more than $200,000, or by both that fine and imprisonment. (Pen. Code, § 653w, subd. (b)(3).) 5)Defines "recording" as any "tangible medium upon which information or sounds are recorded or otherwise stored, including, but not limited to, any phonograph record, disc, tape, audio cassette, wire, film, memory card, flash drive, hard drive, data storage device, or other medium on which information or sounds are recorded or otherwise stored, but does not include sounds accompanying a motion picture or other audiovisual work." (Pen. Code, § 653w, subd. (a)(2).) 6)Defines "audiovisual works" as the "physical embodiment of works that consist of related images that are intrinsically intended to be shown using machines or devices, such as projectors, viewers, or electronic equipment, together with accompanying sounds, if any, regardless of the nature of the material objects, such as films, tapes, discs, memory cards, flash drives, data storage devices, or other devices, on which the works are embodied." (Pen. Code, § 653w, subd. (a)(3).) 7)Requires, in addition to any other penalty or fine, the court to order a person who has been convicted of a music or video piracy to make restitution to an owner or lawful producer, or trade association acting on behalf of the owner or lawful producer, of a phonograph record, disc, wire, tape, film, or other device or article from which sounds or visual images are derived that suffered economic loss resulting from the violation. (Pen. Code, § 1202.4, subd. (r)(1).) AB 1241 Page 3 8)Requires the restitution order be based on the aggregate wholesale value of lawfully manufactured and authorized devices or articles, and to also include reasonable costs incurred as a result of the investigation undertaken by the owner, lawful producer, or trade association acting on behalf of the owner. (Pen. Code, § 1202.4, subd. (r)(1).) FISCAL EFFECT: Unknown COMMENTS: 1)Author's Statement: According to the author, "AB 1241 continues the practice of fine-tuning state laws to address the impact of piracy upon very important industry sections to California. This just clarifies that a minimum fine will be established for those committing a second offense in this criminal area." 2)Underground Economy: The "underground economy" refers to those individuals and businesses that deal in cash and/or use other schemes to conceal their activities, identities, and true tax liabilities from government licensing, regulatory, and taxing agencies. The activities that occur in the underground economy include the sale or transfer of illegal goods, such as pirated music or movies, counterfeit pharmaceutical drugs, vitamins, wine, clothing, accessories, weapons, tax evasion or fraud, and untaxed tobacco products or alcohol. The underground economy hurts legitimate businesses, creates an enormous tax gap and hurts all California due to the loss of revenue. The Board of Equalization estimates that the State of California losses about $8.5 billion dollars annually in tax revenue due to the underground economy. (< http://www.boe.ca.gov/info/underground_economy.htm >.) This revenue is needed to fund critical programs such as education, public safety, infrastructure and social services. 3)Practical Considerations: Setting the penalty, or range of penalties, for a crime is an inherently legislative function. The Legislature does have the power to require a minimum term or other specific sentence. (Keeler v. Superior Court (1970) 2 Cal.3d 619, 631.) Sentencing, however, is solely a judicial power. (People v. Tenorio (1970) 3 Cal.3d 89, 90-93; People AB 1241 Page 4 v. Superior Court (Fellman) (1976) 59 Cal.App.3d 270, 275.) California law effectively directs judges to impose an individualized sentence that fits the crime and the defendant's background, attitude, and record. (Cal. Rules of Court, rules 4.401-4.425.) This bill limits judicial discretion and requires a minimum fine of $1,000 to be imposed in each case in which a defendant has already suffered a prior conviction for piracy, regardless of the facts. Although a minimum fine of $1,000 for a second or subsequent conviction may not be unreasonable, the sentencing judge already has the discretion to impose this amount, and much more. There is no evidence that this amount is not already being imposed in these types of cases. 4)Existing Penalty Assessments: There are penalty assessments and fees assessed on the base fine for a crime. Assuming a defendant was fined $1,000 as the fine for a criminal offense, the following penalty assessments would be imposed pursuant to the Penal Code and the California Government Code: Base Fine: ?? $ 1,000 Penal Code 1464 state penalty on fines: 1,000 ($10 for every $10) Penal Code 1465.7 state surcharge: 200 (20% surcharge) Penal Code 1465.8 court operation assessment: 40 ($40 fee per offense) Government Code 70372 court construction penalty: 500 ($5 for every $10) Government Code 70373 assessment: 30 ($30 for felony or misdemeanor) Government Code 76000 penalty: AB 1241 Page 5 700 ($7 for every $10) Government Code 76000.5 EMS penalty: 200 ($2 for every $10) Government Code 76104.6 DNA fund penalty: 100 ($1 for every $10) Government Code 76104.7 addt'l DNA fund penalty: 400 ($4 for every $10) Total Fine with Assessments: $4,170 It should be noted that this figure does not include victim restitution, or the restitution fine, and that other fines and fees, such as the jail booking fee, attorney fees, OR release fees, probation department fees, may also be applicable. 5)Prioritization of Court-Ordered Debt: Current law under Penal Code section 1203.1d prioritizes the order in which delinquent court-ordered debt received is to be satisfied. The priorities are 1) victim restitution, 2) state surcharge, 3) restitution fines, penalty assessments, and other fines, with payments made on a proportional basis to the total amount levied for all of these items, and 4) state/county/city reimbursements, and special revenue items. The fine at issue in this bill has a fairly low priority in the collection order, falling in the third category. Given that victim restitution in these types of cases is to be on the aggregate wholesale value of lawfully manufactured and authorized devices or articles, and to also include reasonable costs incurred as a result of the investigation undertaken by the owner, lawful producer, or trade association acting on behalf of the owner (Pen. Code, § 1202.4, subd. (r)(1)), it could very well be the case that this fine is unlikely to be collected. A recent San Francisco Daily Journal article noted, "California courts and counties collect nearly $2 billion in fines and fees every year. Nevertheless, the state still has a more than $10.2 billion balance of uncollected debt from prior years, according to the most recent date from 2012." (See AB 1241 Page 6 Jones & Sugarman, State Judges Bemoan Fee Collection Process, San Francisco Daily Journal, (January 5, 2015).) "The annual growth in delinquent debt partly reflects a supply of money that doesn't exist to be collected." (Ibid.) In the same article, the Presiding Judge of San Bernardino County was quoted as saying "the whole concept is getting blood out of a turnip." (Ibid.) 6)Related Legislation: AB 160 (Dababneh) would expand the list of crimes that allow for forfeiture of assets and prosecution of criminal profiteering to include, among other crimes, illegal piracy of recordings or audiovisual works. AB 160 is pending in the Assembly Committee on Revenue and Taxation. 7)Prior Legislation: a) AB 2122 (Bocanegra), Chapter 857, Statutes of 2014, provides that the "true name and address" audio recording and audiovisual works piracy alternate felony-misdemeanor shall apply where the defendant's conduct involved the "commercial equivalent" of at least 100 articles of sound recordings or audiovisual recordings. b) SB 1479 (Pavley), Chapter 873, Statutes of 2012, provides that in music or video piracy cases, restitution shall include the value of pirated works that were seized from the defendant, but not actually sold. c) SB 830 (Wright), Chapter 480, Statutes of 2010, expanded the definition of a "recording" for the purposes of prosecution for failing to disclose the origin of a recording when utilizing the recording for financial gain to include memory cards, flash drives, hard-drives, or data storage devices. d) AB 819 (Calderon), Chapter 351, Statutes of 2010, increased the fines for intellectual property piracy. e) AB 2750 (Krekorian), Chapter 468, Statutes of 2008, required a court to order persons convicted of specified crimes relating to music piracy to pay restitution to not only the owner or lawful producer, but also to a trade AB 1241 Page 7 association acting on behalf of the owner or lawful producer. f) AB 64 (Cohn), Chapter 9, Statutes of 2006, made the possession or sale of at least 100, rather than 1,000, audio recordings punishable as an alternate felony/misdemeanor. REGISTERED SUPPORT / OPPOSITION: Support None Opposition None Analysis Prepared by: Sandy Uribe / PUB. S. / (916) 319-3744