United States v. Gordon ( 2022 )

United States Court of Appeals
For the First Circuit
No. 21-1023
UNITED STATES OF AMERICA,
Appellee,
v.
DOUGLAS GORDON,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. John A. Woodcock Jr., U.S. District Judge]
Before
Lynch and Kayatta, Circuit Judges,
and Woodlock,* District Judge.
Stephen C. Smith for appellant.
Darcie N. McElwee, United States Attorney, with whom Benjamin
M. Block, Assistant U.S. Attorney, was on brief for appellee.
June 23, 2022
* Of the District of Massachusetts, sitting by
designation.
WOODLOCK, District Judge. The appellant, Douglas
Gordon, a film buff since childhood, turned his youthful avocation
into a criminal vocation when he systematically and deceptively
sold counterfeit DVDs of movies without copyright authorization.
A federal jury found Mr. Gordon guilty of two counts for
his criminal copyright infringement and one count of mail fraud
for his scheme of deceptive marketing. He was sentenced to thirty-
six months of imprisonment on the two copyright counts and sixty
months on the mail fraud count, the sentences to be served
concurrently as to each count. Mr. Gordon does not challenge his
mail fraud conviction.
On this appeal, he argues nevertheless that 1) the
verdict should be vacated because the evidence did not show he
willfully committed copyright violations, and/or in the
alternative, 2) that his sentence must be adjusted because of
alleged errors in the district court's loss calculation. We find
these arguments unavailing and affirm.
I. BACKGROUND
A. Facts
From the evidence presented at trial, a reasonable jury
could find the following facts.
During the period of criminal activity alleged in the
superseding indictment on which he was tried — from about January
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21, 2014 to January 20191 — Mr. Gordon ran Edge Video, a small
chain of video stores, and several websites to sell and rent films,
including findrareDVDs.com, lostmoviesfound.com, and
lostmoviefinder.com. These websites sold DVDs of movies not widely
available for sale by making copies that Mr. Gordon and his
employees — or a third-party company, at Mr. Gordon's direction —
derived from "master" DVDs, which were in turn copied from VHS
tapes.
Customers and copyright holders were unhappy about these
commercial activities and made that known to Mr. Gordon. His
employees routinely heard complaints — which they forwarded to
him— from customers who believed they would receive a legitimate
DVD, not a duplicate disc, or found the DVDs did not work or were
of low-quality. One employee said she heard "hundreds" of
complaints and another said complaints came "[a]lmost daily." The
Better Business Bureau forwarded numerous customer complaints to
Mr. Gordon. Copyright holders also sent him cease-and-desist
emails upon their discovery of the reproductions.
1 The counts in the superseding indictment alleged
overlapping time periods of criminal activity. Count 1, the first
copyright count, alleged a period "beginning on or about January
21, 2014 and continuing to about June 3, 2014." Count 2, the
second copyright count, alleged a period "beginning on or about
July 12, 2016 and continuing to about December 30, 2016." Count
3, the mail fraud count, alleged a scheme to defraud "[f]rom about
April, 2014 to about January, 2019."
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State and federal authorities investigated, beginning
their inquiries even before the period of criminal conduct alleged
in the superseding indictment. First, the Maine Attorney General's
Office on August 10, 2012, sent a demand letter to findrareDVDs.com
and Edge Video that asked for documents related to "unfair and
deceptive acts and practices . . . and possible copyright
violations." Maine's Attorney General referred the case to the
federal government thereafter when Mr. Gordon failed to comply
with the demand letter.
The ensuing federal investigation uncovered hundreds of
orders for DVDs, over two hundred complaints from customers, and
multiple cease-and-desist emails. A search of Mr. Gordon's
residence on August 4, 2015 turned up DVD duplicators, computers,
master discs, copies of discs to be mailed out (with the FBI
copyright warning removed from films), and mail addressed to
findrareDVDs.com. The federal government sent Mr. Gordon a target
letter on the same date as the search, notifying him that he was
under investigation for "mail fraud, wire fraud, and criminal
infringement of movies protected by copyright."
Despite the complaints, the investigations, and the
letters from state and federal authorities, Mr. Gordon was
undeterred. An associate testified that Mr. Gordon continued
copying movies months after the August 2015 search. The Motion
Picture Association, a movie studio trade organization, bought a
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movie from lostmoviesfound.com in December 2016 and received what
it described as a counterfeit copy. The Association then sent Mr.
Gordon a cease-and-desist letter, noting his actions were illegal
under federal law.
Mr. Gordon doubled down by employing an out-of-state
vendor to conceal his operations. Starting in March 2017, he had
Kunaki, a Nevada company, take over copying and mailing DVDs. He
told an associate that, were federal investigators to search his
home again, "they [wouldn't] find anything and they [wouldn't] be
able to take this away from [him]." Kunaki would later suspend
Mr. Gordon's accounts, first in early December 2018 due to a
complaint from a purchaser that a disc was "pirated," and then
several weeks later after a federal agent contacted the company.
A second search of Mr. Gordon's residence on May 10,
2017, again found a DVD duplicator, computers, DVDs, VHS tapes,
order forms, and mail sent to findrareDVDs.com and
lostmoviesfound.com. The seized computers showed a user had
visited copyright.gov and retrieved copyright certificates. A
user had also, between August 2015 and June 2016, searched for
information on copyright infringement and defenses.
B. Charges and Trial
In the operative charging document, the superseding
indictment handed down on April 17, 2019, Mr. Gordon was charged
with two counts of criminal copyright infringement, in violation
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of 17 U.S.C. § 506(a)(1)(B) and 18 U.S.C. §§ 2319(a), 2319(c)(1)
and 2, and one count of mail fraud, in violation of 18 U.S.C.
§§ 1341 and 2.2 A jury found Mr. Gordon guilty of all three counts.
At trial, Mr. Gordon contended his actions were not
willful because he believed that his sales were permitted based on
the DVDs' status as orphan works and on the fair use doctrine. As
to orphan works, Mr. Gordon testified that he believed that if the
owner of content no longer existed, he was free to reproduce it,
since "there would be no damages if there's no copyright holder."
As to fair use, Mr. Gordon testified he believed after considering
the matter that his reproductions were permissible. He testified
he would primarily consider whether the movie was ever on DVD — if
not, he might sell it, because he assumed any sales could not
affect the DVD market. And he further testified he would consider
whether the movie was old enough to "have an educational value to
society," which, in his view, would weigh in favor of fair use.
As to the copyright counts, the jury was instructed that
they needed to find, among other things, "that Mr. Gordon infringed
the copyright willfully." The jury was told that to act willfully
"mean[t] to act voluntarily and intelligently and with the specific
2 The copyright counts in the superseding indictment were
identical to the copyright counts brought in the original
indictment handed down on January 17, 2019. The original
indictment charged only copyright violations. The mail fraud count
was added in the superseding indictment.
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intent that the underlying crime be committed, that is to say,
with bad purpose, either to disobey or disregard the law, not to
act by ignorance, accident, or mistake."3 Further, the jury was
told that "Mr. Gordon's actions could be willful even if he only
knew that the copying may be illegal, but did not know that it was
to a certainty." The jury was told "[t]he willfulness requirement
[could] also be satisfied if there [was] a showing that Mr. Gordon
deliberately disregarded a high probability that he was infringing
copyrights."
In addition to the instruction on willfulness, the jury
received instructions on fair use and orphan works. The district
court told the jury that "United States copyright law does not
recognize the concept of an orphan work." For fair use, the jury
was told that if it found "the elements of a copyright violation
beyond a reasonable doubt," Mr. Gordon needed to show that "his
use was more likely fair use than not," based on a preponderance
of the evidence. Mr. Gordon does not challenge any of these
instructions.
3 We note our decision in United States v. Beltran merely
assumed without deciding that specific intent is required by the
willfulness element of a criminal copyright infringement charge.
503 F.3d 1, 2 (1st Cir. 2007); see also United States v. Liu, 731
F.3d 982, 989-90 (9th Cir. 2013). This case does not raise any
question concerning that issue because there is no challenge to
the instructions presented here.
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C. Sentencing
The presentence report prepared by the Probation Office
performed two loss calculations, one for the copyright counts and
one for the mail fraud count based on deceptive marketing. For
both calculations, the presentence report relied on the
government's records submitted at trial and found a value of
$638,659.60 for each calculation. The report noted that in
copyright cases it is preferable to rely on the retail value of
the infringed items. See U.S.S.G. § 2B5.3 n.2(A)(v). Although
the movies at issue in the report were not sold commercially — as
a result of which no direct retail price point was available — the
report found Mr. Gordon sold DVDs for close to or more than the
average price of a DVD for a feature film at the time. Thus, the
report found the $638,659.60 figure applicable, as a sum based on
Mr. Gordon's proceeds.
The presentence report then grouped the three counts
together for purposes of the offense level guideline calculation,
because the counts "involve[d] two or more acts or transactions
connected by a common criminal objective or constituting part of
a common scheme or plan," and for the additional reason that "the
offense level [was] determined largely on the basis of the total
amount of harm or loss." See U.S.S.G. §§ 3D1.2(b) and (d). To
calculate the total offense level for the group, the report started
by considering what the offense levels would be separately for the
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mail fraud count and for the copyright counts. The mail fraud
count had a base offense level of seven, U.S.S.G. § 2B1.1(a)(1),
and the copyright counts both had a base offense level of eight,
U.S.S.G. § 2B5.3(a). The $638,659.60 loss value meant a fourteen-
level increase over the base level for all counts, because that
loss amount fell in the range between $550,000 and $1,500,000.
See U.S.S.G. §§ 2B1.1(b)(1)(H) and 2B5.3(b)(1). Ultimately, the
mail fraud count produced the highest total offense level — 31,
compared to 30 for the copyright counts — due to other specific
offense characteristics4 not relevant for the copyright counts;
consequently, the report found the total offense level for mail
fraud applicable. See U.S.S.G. § 3D1.3(a).
At his sentencing hearing, Mr. Gordon made three
objections to the loss calculation in the presentence report.
First, he argued the sales included in the calculation were too
speculative. Second, he contested "whether sales from
findrareDVDs.com and lostmoviesfound.com were part of the same
course of conduct as the offense of conviction." See U.S.S.G. §
3D1.2(b). Third, he said the calculations of loss incorrectly
included some legitimate sales.
4 These additional offense characteristics, only
applicable for mail fraud, concerned the victim count, see U.S.S.G.
§ 2B1.1(b)(2)(A)(i), and Mr. Gordon's decision to relocate the
scheme to another jurisdiction to evade detection, see U.S.S.G. §
2B1.1(b)(10)(A).
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The district court rejected those arguments and adopted
the loss calculations in the presentence report. Relying on a
government affidavit mirroring the records presented at trial and
used in the presentence report, the district court found the
$638,659.60 loss figure supported. Relying upon United States v.
Pennue, 770 F.3d 985 (1st Cir. 2014), the district court concluded
sales in this figure were all part of the same course of conduct.
The district court further found that even if some sales included
within the loss calculation figure were "legitimate," there would
not be nearly enough proceeds from "legitimate" sales to lower the
loss amount below $550,000, the threshold triggering the fourteen-
level increase. Accordingly, the district court grounded its
guideline calculation on the presentence report loss analysis.
Based on this loss analysis, together with other
guideline factors considered, Mr. Gordon's total offense level was
determined to be 31 and, because he had no criminal history, the
resultant guideline range was 108 to 135 months.5 See U.S.S.G.
ch. 5, pt. A (sentencing table). Mr. Gordon was sentenced to
concurrent prison terms of thirty-six months for the copyright
counts and sixty months for the mail fraud count.
5 Had sentencing been based exclusively on the copyright
counts, Mr. Gordon's offense level would have been 30, one level
lower than his offense level for the mail fraud. An offense level
of 30, combined with Mr. Gordon's lack of criminal history, would
have resulted in a guideline range of 97 to 112 months. See
U.S.S.G. ch. 5, pt. A (sentencing table).
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D. Arguments on Appeal
Mr. Gordon filed a timely notice of appeal on January 6,
2021. He presses two arguments on appeal, neither of which were
presented to the trial court. First, he says there was
insufficient evidence for the jury to find that his copyright
infringements were willful. Second, he says the district court
erred in its guideline loss calculation in two ways. He contends
(a) the district court was wrong to account for sales of movies
for which the government did not submit copyright certificates,
and (b) the district court failed to account for refunds that he
gave to dissatisfied customers.
II. MERITS
A. Sufficiency of the Evidence
Because Mr. Gordon did not present a Rule 29 motion at
the close of the government's case nor after his presentation of
evidence, and he did not move for judgment of acquittal after the
jury's verdict, we review his challenge to the sufficiency of the
evidence for clear and gross injustice. See United States v.
Hernández-Román, 981 F.3d 138, 143 (1st Cir. 2020). In this
connection, "[t]here can be no clear and gross injustice if the
evidence, scrutinized in the light most congenial with the verdict,
can support a finding of guilt beyond a reasonable doubt." Id.Mr. Gordon's challenge centers on whether the evidence
showed he willfully committed copyright violations. "[W]hen used
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in the criminal context, a 'willful' act is one undertaken with a
'bad purpose.'" Bryan v. United States, 524 U.S. 184, 191-92
(1998) (footnote omitted). That is, "in order to establish a
'willful' violation of a statute, 'the Government must prove that
the defendant acted with knowledge that his conduct was unlawful.'"
Id. (quoting Ratzlaf v. United States, 510 U.S. 135, 137 (1994)).
Guilty knowledge can be inferred based on the defendant's disregard
of warning signs "sufficient to put a reasonably prudent person on
inquiry notice." United States v. Singh, 222 F.3d 6, 11 (1st Cir.
2000). This standard aligns with the jury instructions given at
Mr. Gordon's trial, and Mr. Gordon does not challenge those
instructions, only the sufficiency of the evidence as to
willfulness.
There is overwhelming evidence that Mr. Gordon could be
found not merely to have deliberately closed his eyes to the
illegality of his conduct. More fundamentally, the jury could
easily have found that he acted with actual knowledge that his
conduct was illegal.
As a filmmaker, Mr. Gordon took care to mark his own
work for copyright protection. In fact, he described to a
colleague how to seek copyright protection, the reasons for doing
so, and the risks for filmmakers in using copyrighted work
belonging to others. In the course of selling copied DVDs — from
which he stripped the FBI copyright warnings used in the originals
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— he received complaints from copyright holders. Mr. Gordon
persisted in his activities even while knowing he was under
investigation by the Maine Attorney General and the federal
government. With this record, a rational jury could readily
conclude beyond a reasonable doubt that Mr. Gordon acted willfully.
Mr. Gordon says that he considered the potential illegal
nature of his actions and that he did his best to obey the law by
following his understanding of the concepts of "orphan works" and
of fair use. But those arguments wither in the light generated
by the many warning signs demonstrating his knowledge that he was
breaking the law. We are tasked with construing the facts in the
light most favorable to the jury's guilty verdict. With that in
mind, even if we could discern some plausibility to Mr. Gordon's
arguments, there is more than sufficient evidence for the jury to
have found a willful intent.
Mr. Gordon testified at trial about why he believed his
actions were legal. The jury understandably did not choose to
credit his testimony. Moreover, the jury heard an abundance of
evidence summarily recounted here that included a demonstration
that Mr. Gordon continued to copy movies after receiving multiple
warnings from copyright owners and being under state and federal
investigation. It was well within the bounds of reason for the
jury, having weighed Mr. Gordon's contentions against the record,
to find his actions willful.
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B. Loss Calculation
We find it helpful for clarity of analysis to divide the
defendant's loss calculation contentions into three categories.
Here we conduct review for plain error. 6 Plain error review
requires us to determine "(1) that an error occurred (2) which was
clear or obvious and which not only (3) affected the defendant's
substantial rights, but also (4) seriously impaired the fairness,
integrity, or public reputation of judicial proceedings." United
States v. Madsen, 809 F.3d 712, 717 (1st Cir. 2016) (citation and
internal quotation marks omitted). This is a "heavy burden."
United States v. Pérez-Rodríguez, 13 F.4th 1, 16 (1st Cir. 2021).
"Appellate review of federal criminal sentences is characterized
by a frank recognition of the substantial discretion vested in a
sentencing court." United States v. Flores-Machicote, 706 F.3d
16, 20 (1st Cir. 2013).
1. Certificates. Mr. Gordon testified at trial that,
for all movies on his websites, he checked copyright.gov and found
they were registered for copyright protection. The district court
had no occasion to explore the validity of the copyrights through
considerations of certificates at sentencing because Mr. Gordon
6 The government argues that Mr. Gordon waived his
guideline claims. Given our disposition of the merits of the
issues in this case, we need not address the government's waiver
argument.
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did not raise the certificate issue until appeal.7 The district
court reasonably relied on Mr. Gordon's testimony to find by a
preponderance of the evidence that all movies in the calculation
were copyright-protected. See U.S.S.G. § 6A1.3(a) (allowing for
flexibility in evidence considered by sentencing judge).
2. Reasonable Estimation. More broadly, we also see no
error with respect to the submission of certificates because the
district court carefully explained why the government's estimates
were reasonably reliable and why the sales were all part of the
same course of conduct. The court noted some sales were possibly
"legitimate" but that any such sales could not have been enough to
reduce the loss calculation from $638,659.60 to below $550,000,
the threshold for the fourteen-level increase from the base offense
level. See § 2B1.1 cmt. n. 3(C) ("The [district] court need only
make a reasonable estimate of the loss."). There was nothing
unduly speculative in the district court's explanation of loss.
We see no error in the district judge's loss calculation, even if
based on copyright infringement alone.
7 We note that we held some fifteen years ago that
registration evidenced by a certificate is not required to
establish a criminal copyright violation. Beltran, 503 F.3d at 2(holding, in the alternative, that Section 411 of the Copyright
Act of 1976, codified at 17 U.S.C. "appears to govern only civil
infringement suits"). We are aware of no developments since then
that would prompt us to suggest reconsideration of that holding.
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3. Refunds. Mr. Gordon suggests that the loss
calculation failed to account for refunds that he sometimes gave
to dissatisfied customers. The guidelines contain a call for
leniency where a defendant has returned money received through
criminal actions. See U.S.S.G. § 2B1.1 cmt. n. 3(E)(i).
The comment in the guidelines that Mr. Gordon cites says
that a loss calculation "shall be reduced by" the sum of:
The money returned, and the fair market value of the
property returned and the services rendered, by the
defendant or other persons acting jointly with the
defendant, to the victim before the offense was
detected. The time of detection of the offense is the
earlier of (I) the time the offense was discovered by a
victim or government agency; or (II) the time the
defendant knew or reasonably should have known that the
offense was detected or about to be detected by a victim
or government agency.
U.S.S.G. § 2B1.1 cmt. n. 3(E)(i) (emphasis added).
This comment makes plain that Mr. Gordon's argument goes
nowhere. The loss calculation only included sales from after
January 21, 2014, the beginning of the period of the criminal
activity specified in the superseding indictment. Mr. Gordon can
only claim the benefit of refunds he gave before the point at which
his offenses were detected, a point defined as when either the
government or a victim detected the offenses or when a defendant
"knew or reasonably should have known the offense[s] were detected"
– whichever was earlier. Id.; United States v. Maisonet-González,
785 F.3d 757, 763 (1st Cir. 2015).
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It was indisputably known to Mr. Gordon that his offenses
had been detected by August 2012 — over a year before the time
covered by the loss calculation — when the Maine Attorney General's
Office sent him a demand letter. At that point, customers who
would qualify as victims had already complained — hence the state
investigation — and the Maine Attorney General had reason to
believe he was violating the law — hence the notice in the demand
letter. The demand letter put Mr. Gordon himself on notice that
the offenses had been detected. Refunds made after that date are
not entitled to leniency. We see no merit then to Mr. Gordon's
contention that the loss calculation failed to account for any
relevant refunds.
III. CONCLUSION
Because we find Mr. Gordon's arguments on appeal
unavailing, we affirm the judgment of the district court.
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