United States v. Julius Chow Lieh Liu

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, No. 10-10613
Plaintiff-Appellee,
D.C. No.
v. 5:06-cr-00772-JW-1
JULIUS CHOW LIEH LIU,
Defendant-Appellant. OPINION
Appeal from the United States District Court
for the Northern District of California
James Ware, District Judge, Presiding
Argued and Submitted
March 11, 2013—San Francisco, California
Filed October 1, 2013
Before: John T. Noonan, Raymond C. Fisher,
and Jacqueline H. Nguyen, Circuit Judges.
Opinion by Judge Nguyen
2 UNITED STATES V. LIU
SUMMARY*
Criminal Law
The panel vacated convictions and sentences on three
counts of criminal copyright infringement and one count of
trafficking in counterfeit labels in a case in which the
defendant’s company commercially replicated CDs and
DVDs for various clients on a scale that subjects the
defendant to substantial criminal liability if a client – and, by
extension, the defendant – lacked permission from the
copyright holder to make the copies.
The panel held that the term “willfully” in 17 U.S.C.
§ 506(a) requires the government to prove that a defendant
knew he was acting illegally rather than simply that he knew
he was making copies, and that to “knowingly” traffic in
counterfeit labels under 18 U.S.C. § 2318(a)(1) requires
knowledge that the labels were counterfeit. Because the
district court improperly instructed the jury otherwise and the
errors were not harmless, the panel vacated the convictions
and remanded.
The panel concluded that the district court should dismiss
one of the copyright infringement counts on remand because
counsel was ineffective by failing to raise an obvious statute-
of-limitations defense.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
UNITED STATES V. LIU 3
COUNSEL
David J. Cohen (argued) and Jason T. Campbell, Bay Area
Criminal Lawyers, PC, San Francisco, California, for
Defendant-Appellant.
Jenny Ellickson (argued), Trial Attorney, Melinda Haag,
United States Attorney, and Barbara J. Valliere, Chief,
Appellate Division, United States Department of Justice, San
Francisco, California, for Plaintiff-Appellee.
OPINION
NGUYEN, Circuit Judge:
Julius Liu appeals his convictions and sentence for
criminal copyright infringement and trafficking in counterfeit
labels. Liu’s company, Super DVD, commercially replicated
CDs and DVDs for various clients on a scale that subjects
him to substantial criminal liability if a client—and, by
extension, Liu—lacked permission from the copyright holder
to make the copies.
Under the relevant criminal statutes, Liu’s guilt turns on
whether he acted “willfully” and “knowingly.” We hold that
the term “willfully” requires the government to prove that a
defendant knew he was acting illegally rather than simply that
he knew he was making copies. Similarly, to “knowingly”
traffic in counterfeit labels requires knowledge that the labels
were counterfeit. Because the district court improperly
instructed the jury otherwise, we vacate Liu’s convictions and
remand. We also conclude that the district court should
dismiss the second count against Liu on remand because his
4 UNITED STATES V. LIU
counsel was ineffective, failing to raise an obvious
statute-of-limitations defense.
BACKGROUND
I. The Replication of CDs and DVDs
Commercial CD and DVD replication differs from the
process of recording content onto CDs and DVDs in that pre-
recorded discs have their content stamped onto them—
requiring a molding machine and a stamper—rather than
burned. To create a CD stamper, a process known as
“mastering,” some source material containing digital content
is necessary, such as a tape, recordable CD, or music file.
Counterfeiters making a “straight counterfeit,” i.e., an exact
copy of an existing CD, can start with either a legitimate or
counterfeit version of the CD. Counterfeiters making a
previously nonexistent compilation of tracks take multiple
legitimate disks and burn the relevant tracks onto a recordable
CD, which then serves as the source material for the stamper.
Replication plants process orders for customers, who are
typically the publishers (or persons purporting to be the
publishers) who own the reproduction rights to the works in
question. While a few plants specialize in mastering, most
deal exclusively with replicating. Plants offering both types
of services are rare because of the higher cost associated with
mastering, which requires more expensive equipment, larger
premises, a clean room environment, and greater expertise to
operate. A replication plant that does not create stampers
in-house will outsource the work to a mastering plant.
UNITED STATES V. LIU 5
II. The Investigation of Liu and Super DVD
Liu has worked in the replication industry since the early
1990s. In 2000, he founded, and became the CEO of, a
DVD-manufacturing company called Super DVD. By 2001,
Super DVD employed about 65 people and operated four
replication machines at its Hayward, California warehouse.
In mid-2001, Super DVD fell on hard financial times.
The manufacturer of one of its replication machines went
bankrupt and the machine was taken back to Irvine,
California. Two of the other machines were repossessed
because Super DVD fell behind on its lease payments. Use
of the final replication machine was frozen due to a dispute
over royalties between the machine manufacturer and another
company. Super DVD’s engineers left for other employment,
and in 2003 the company did not renew its business license
with the city. In an effort to lease the factory space, Liu
showed the property to approximately 10–15 persons per
week.
Meanwhile, the government had become suspicious of
Super DVD’s operations. In May 2003, Immigration and
Customs Enforcement agents raided the warehouse of Vertex
International Trading, a computer software reseller based in
Coral Springs, Florida, where agents recovered counterfeit
copies of the Symantec software “Norton Anti-Virus 2003”
and related documentation. The documentation included
purchase orders, handwritten notes, and FedEx shipping
labels from more than 50 vendors, including Super DVD.1
1
Liu challenges the admissibility of evidence recovered from the
warehouse. Because we overturn Liu’s convictions on other grounds, we
do not address Liu’s evidentiary objections.
6 UNITED STATES V. LIU
Later that month, private investigator Cynthia Navarro,
working on behalf of Symantec, posed as a potential lessee to
investigate Super DVD’s warehouse. While there, Navarro
observed a man using one of two machines that she believed
were used for CD or DVD replication. Through a window,
she could see into a locked room that was filled wall to wall
with spindles of CDs.
At the end of July 2003, agents executed a search warrant
on the Super DVD warehouse and recovered thousands of
DVDs and CDs. One room stored CDs and DVDs, and
another held stampers, artwork, and masters. The CDs
included a compilation of rap tracks, Rap Masters Vol. 2;
three compilations of Latin music tracks, Los Tucanes de
Tijuana: Romanticas, Lo Mejor de la Mafia, and 3 Reyars
[sic] del Tex Mex: Romanticas; and a greatest hits album,
Beatles 1. The agents also recovered DVD copies of the film
Crouching Tiger, Hidden Dragon. Liu did not have
authorization from the copyright holders to replicate any of
these works.
During an interview and at trial, Liu admitted that Super
DVD manufactured the Crouching Tiger DVDs in 2001 for
a company called R&E Trading. R&E gave Super DVD a
stamper with the name “Tiger” on it but not the full title of
the film. The DVDs were still in Super DVD’s warehouse at
the time the search warrant was executed because R&E had
rejected them, claiming that the movies would freeze. Liu
stated that when R&E refused to pay for the order, he became
personally involved and realized that R&E did not have the
rights to duplicate such a famous movie. Super DVD filed a
lawsuit against R&E alleging that R&E deceived it about the
copyrights. The lawsuit sought payment from R&E on about
40 invoices totaling approximately $85,000, including work
UNITED STATES V. LIU 7
done on the Crouching Tiger movie. Super DVD obtained a
jury verdict for approximately $600.
Liu generally denied any knowledge of or involvement in
replicating the other works. Liu explained that he became
involved with the Latin music compilations when one of the
former Super DVD engineers introduced Liu to his uncle,
Juan Valdez, a famous mariachi singer. Liu and Valdez got
together and played music—Liu on the guitar, Valdez
singing. Valdez expressed interest in publishing CDs, and Liu
told him that he didn’t have the facility to do it but suggested
companies that could take care of the mastering, printing, and
even the sleeve. Liu volunteered to do the overwrapping for
Valdez because it only cost him “pennies.” Valdez told Liu
that he created the tracks by mixing his voice with music
from a Karaoke machine and that he had paid for the license.
Liu listened to some of the tracks and, believing that it was
Valdez’s voice, thought that the music “belong[ed] to him.”
III. Liu’s Convictions and Sentence
The government charged Liu with three counts of
criminal copyright infringement under 17 U.S.C.
§ 506(a)(1)(A) and 18 U.S.C. § 2319(b)(1) based on the
music CDs, the Crouching Tiger DVD, and the Norton Anti-
Virus software. A fourth count alleged that Liu trafficked in
the counterfeit labels on the software, 18 U.S.C. § 2318(a).
Following a three-day jury trial, Liu was convicted on all
counts. The district court sentenced Liu to four years in
prison followed by three years of supervised release.
8 UNITED STATES V. LIU
JURISDICTION
The district court had jurisdiction under 18 U.S.C. § 3231.
We have jurisdiction under 18 U.S.C. § 3742 and 28 U.S.C.
§ 1291.
ANALYSIS
I. The District Court Erred in Instructing the Jury on
the “Willfulness” and “Knowledge” Elements
A. Standard of Review
“When a party properly objects to a jury instruction, we
review de novo whether the instructions given ‘accurately
describe the elements of the charged crime.’” United States
v. Munguia, 704 F.3d 596, 598 (9th Cir. 2012) (quoting
United States v. Heredia, 483 F.3d 913, 921 (9th Cir. 2007)
(en banc)). A district court’s omission or misstatement of an
element of an offense in the jury instructions is subject to
harmless error review. United States v. Wilkes, 662 F.3d 524,
544 (9th Cir. 2011) (quoting United States v. Kilbride,
584 F.3d 1240, 1247 (9th Cir. 2009)). We review
unpreserved errors in the jury instructions for plain error.
United States v. Phillips, 704 F.3d 754, 762 (9th Cir. 2012)
(citing United States v. Moreland, 622 F.3d 1147, 1166–67
(9th Cir. 2010)).
The parties disagree as to whether Liu properly preserved
an objection to the jury instructions so as to be entitled to de
novo review. Liu argues that the district court failed to
provide him an opportunity to object to the jury instructions
as required under Federal Rule of Criminal Procedure 30(d).
We agree.
UNITED STATES V. LIU 9
Liu requested an instruction parroting 17 U.S.C.
§ 506(a)(2)—that “[e]vidence of reproduction or distribution
of a copyrighted work, by itself, shall not be sufficient to
establish willful infringement of a copyright.” The
government did not include this language in its proposed
instruction on the elements of copyright infringement, and
Liu objected on that basis. The government informed the
court that it had no problem with Liu’s requested instruction.
The night before closing arguments, the district court
emailed counsel a tentative set of jury instructions and
indicated that it would give them a revised draft in the
morning if it made additional changes. The next morning,
before the defense presented its case, the district judge stated
that “some changes to the instructions [were made]. . . , none
that I think are of substance.” In fact, the court had made
several substantive changes. In particular, it added the
definition of “knowingly” that is now at issue. Previously,
that instruction had simply stated that the government needed
to prove that Liu “knowingly trafficked in counterfeit labels
affixed or designed to be affixed to copies of a copyrighted
computer software product called ‘Norton Anti-Virus 2003’
belonging to Symantec Corporation.” The final version of the
instruction added that
An act is done “knowingly” if the Defendant
is aware of the act and does not act through
ignorance, mistake or accident. The
government is not required to prove that the
defendant knew that his act was unlawful.
You may consider evidence of the
Defendant’s words, acts, or omissions, along
with all the other evidence, in deciding
whether the defendant acted knowingly.
10 UNITED STATES V. LIU
Besides adding the instruction defining “knowingly,” the
district court did not include in the final version the
instruction regarding proof of willful copyright infringement
requested by Liu and acquiesced to by the government.
Instead, it added its own explanation of willful infringement
that incorporated the government’s requested instruction
defining infringement generally, without a mens rea element.
The court instructed the jury that Liu “willfully infringed” if
he “without authorization duplicated, reproduced or sold the
copyright belonging to the owners of the works.” The court
further adopted the government’s requested definition of
willfully—that “[a]n act is done ‘willfully’ if the act is done
knowingly and intentionally, not through ignorance, mistake
or accident.”
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. Further, after
the court delivered the instructions to the jury, it did not ask
counsel whether there were any objections to them before the
jury retired to consider its verdict. The court’s procedure
casts serious doubt upon its compliance with Rule 30(d) and
due process. See United States v. Loya, 807 F.2d 1483, 1492
(9th Cir. 1987); United States v. Nerone, 563 F.2d 836,
847–48 (7th Cir. 1977). Even if Liu’s counsel could have
objected to the instructions between the time they were
delivered and the time the jury began deliberating, any
resultant modification to the instructions would have risked
calling the jury’s attention to the issue. Under these
circumstances, Liu was not required to object. See United
States v. Ramirez, 714 F.3d 1134, 1137–38 (9th Cir. 2013).
We thus review for instructional error de novo. Id.UNITED STATES V. LIU 11
B. The “Willfulness” Element of Criminal Copyright
Infringement Requires Knowledge that the
Conduct Was Unlawful
Copyright infringers have been subject to civil liability
since the Nation’s founding. See Act of May 31, 1790, ch.
15, § 2, 1 Stat. 124, 124–25. In a civil suit, liability for
copyright infringement is strict. “[T]he innocent intent of the
defendant constitutes no defense to liability.” Monge v. Maya
Magazines, Inc., 688 F.3d 1164, 1170 (9th Cir. 2012) (citing
4 Melville B. Nimmer & David Nimmer, Nimmer on
Copyright § 13.08[B][1] (Matthew Bender rev. ed. 2011)).
Congress first imposed criminal liability for certain types
of infringement in the late nineteenth century. See Act of
January 6, 1897, ch. 4, 29 Stat. 481, 482. The general
approach to criminal copyright enforcement—then, as
now—has been to punish only those violations that are both
willful and economically motivated. See id. (punishing as
misdemeanor infringement that is “willful and for profit”);
accord Copyright Act of 1976, Pub. L. 94-553, ch. 5,
§ 506(a), 90 Stat. 2541, 2586 (codified as amended at
17 U.S.C. § 506(a)(1)(A)) (imposing criminal liability on
“[a]ny person who infringes a copyright willfully and for
purposes of commercial advantage or private financial gain”).
Of the two factors that distinguish criminal from non-
criminal copyright violations, willfulness and commerciality,
the latter is of little practical importance. The Copyright Act
defines “financial gain” broadly to include “receipt, or
expectation of receipt, of anything of value, including the
receipt of other copyrighted works.” 17 U.S.C. § 101. The
commerciality requirement thus “does not meaningfully
winnow down the population of copyright defendants
12 UNITED STATES V. LIU
potentially liable to incarceration . . . . [T]he only bar against
an overzealous prosecutor criminalizing nearly every
copyright infringement case lies in the other prerequisite to
criminal liability: willfulness.” 4 Nimmer, supra,
§ 15.01[A][2].
But the term “willfully” is ambiguous.2 See Ratzlaf v.
United States, 510 U.S. 135, 141 (1994) (“‘Willful’ . . . is a
‘word of many meanings . . . .’” (quoting Spies v. United
States, 317 U.S. 492, 497 (1943))). To infringe willfully
could simply mean to intentionally commit the act that
constitutes infringement. Alternatively, it could mean that
the defendant must act with a “‘bad purpose’ or ‘evil motive’
in the sense that there was an ‘intentional violation of a
known legal duty.’” United States v. Moran, 757 F. Supp.
1046, 1048 (D. Neb. 1991) (quoting Cheek v. United States,
498 U.S. 192, 200 (1991)). The 1976 Copyright Act does not
define “willfully,” and its legislative history offers little
guidance. See id. at 1049 n.2.
When faced with a criminal statute containing an
ambiguous “willfulness” element, courts normally resolve
any doubt in favor of the defendant. Ratzlaf, 510 U.S. at 148
(citing Hughey v. United States, 495 U.S. 411, 422 (1990)).
Although the general rule is that “ignorance of the law or a
mistake of law is no defense to criminal prosecution,” the
modern proliferation of statutes and regulations “sometimes
2
Even within the context of civil copyright infringement, we have
defined “willful” to mean different things in different contexts. See
Barboza v. New Form, Inc. (In re Barboza), 545 F.3d 702, 707–08 (9th
Cir. 2008) (“The term ‘willful’ as used in copyright infringement cases is
not equivalent to ‘willful’ as used in determining whether a debt is
nondischargeable under the bankruptcy code.”).
UNITED STATES V. LIU 13
ma[kes] it difficult for the average citizen to know and
comprehend the extent of the duties and obligations imposed
by the . . . laws.” Cheek, 498 U.S. at 199–200. Thus, the
government must prove that the defendant acted
“willfully”—that is, with “specific intent to violate the
law”—to be convicted of certain federal criminal offenses.
Id. at 200 (citing United States v. Murdock, 290 U.S. 389(1933)); see also Bryan v. United States, 524 U.S. 184,
191–92 (1998) (“As a general matter, when used in the
criminal context, a ‘willful’ act is one undertaken with a ‘bad
purpose.’ In other words, 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.’” (quoting Ratzlaf, 510 U.S. at 137) (footnote
omitted)).
In reviewing a conviction for criminal copyright
infringement, we, and numerous other circuits, have assumed
that proof of the defendant’s specific intent to violate
someone’s copyright is required. See United States v.
Beltran, 503 F.3d 1, 2 (1st Cir. 2007); United States v.
Manzer, 69 F.3d 222, 227 (8th Cir. 1995); United States v.
Minor, 756 F.2d 731, 734 (9th Cir. 1985); United States v.
Gottesman, 724 F.2d 1517, 1522 (11th Cir. 1984); United
States v. Whetzel, 589 F.2d 707, 712 (D.C. Cir. 1978);3 see
also United States v. Heilman, 614 F.2d 1133, 1137 (7th Cir.
3
Early prosecutions for criminal copyright infringement under the 1976
Copyright Act also charged the defendants with violating the National
Stolen Property Act, which criminalizes the interstate transport of goods,
wares, or merchandise that were “stolen, converted or taken by fraud.”
18 U.S.C. § 2314. In Dowling v. United States, 473 U.S. 207 (1985), the
Supreme Court held that copyright infringement did not constitute theft,
conversion, or fraud, abrogating Minor, Gottesman, and Whetzel, which
had held to the contrary.
14 UNITED STATES V. LIU
1980) (holding so). But compare United States v. Backer,
134 F.2d 533, 535 (2d Cir. 1943) (finding sufficient evidence
that the defendant had willfully copied where he “deliberately
had the copies made and deliberately sold them for profit”),
with United States v. Rose, 149 U.S.P.Q. 820, 824 (S.D.N.Y.
1966) (instructing, notwithstanding Backer, that the
government must prove the defendant acted “voluntarily and
purposely and with specific intent to do that which the law
forbids—that is to say, with bad purpose either to disobey or
disregard the law”). We now explicitly hold that “willfully”
as used in 17 U.S.C. § 506(a) connotes a “voluntary,
intentional violation of a known legal duty.” Cheek, 498 U.S.
at 201 (internal quotation marks omitted).
The Copyright Act’s legislative history supports our
interpretation. In 1997, Congress updated the statutory
provision governing criminal copyright infringement by
inserting the language that Liu requested: “evidence of
reproduction or distribution of a copyrighted work, by itself,
shall not be sufficient to establish willful infringement.” No
Electronic Theft (NET) Act, Pub. L. 105-147, § 2(b), 111 Stat
2678, 2678 (1997) (codified as amended at 17 U.S.C.
§ 506(c)). This language was in response to the “on-going
debate about what precisely is the ‘willfulness’ standard in
the Copyright Act.” 143 Cong. Rec. S12,689 (daily ed. Nov.
13, 1997) (statement of Sen. Orrin Hatch); see also id. at
12,690 (statement of Sen. Patrick Leahy) (“This clarification
was included to address the concerns expressed . . . because
the standard of ‘willfulness’ for criminal copyright
infringement is not statutorily defined and the court’s
interpretation[s] have varied somewhat among the Federal
circuits.”); H.R. Rep. No. 105-339, at 9 (1997) (explaining
that the Subcommittee on Courts and Intellectual Property
amended the bill “to define ‘willful’ misconduct” in response
UNITED STATES V. LIU 15
to “questions concerning the meaning of the word and its
application in the electronic environment”).4 Upon passage
of the bill in the Senate, Senator Hatch stated that willful
“ought to mean the intent to violate a known legal duty. . . .
As Chairman of the Judiciary Committee, that is the
interpretation that I give to this term. Otherwise, I would
have objected and not allowed this bill to pass by unanimous
consent.” 143 Cong. Rec. S12,689.
As a practical matter, requiring only a general intent to
copy as a basis for a criminal conviction would not shield any
appreciable amount of infringing conduct from the threat of
prosecution. Civil liability will not lie if an author
fortuitously creates a work that is substantially similar to
another author’s copyrighted work. See Airframe Sys., Inc. v.
L-3 Commc’ns Corp., 658 F.3d 100, 106 (1st Cir. 2011)
(“[E]ven when two works are substantially similar with
4
Industry representatives and other stakeholders testifying before
Congress expressed their hope that the term “willful” would be “given the
interpretation that [the majority of] courts ha[d] given [it] in the criminal
context,” i.e., “that it is not enough for the defendant in a criminal case to
have had an intent to copy the work; he must have acted with knowledge
that his conduct constituted copyright infringement.” Copyright Piracy,
and H.R. 2265, the No Elec. Theft (NET) Act: Hearing Before the
Subcomm. on Courts and Intellectual Prop. of the Comm. on the Judiciary
H.R., 105th Cong. 13–14 (1997) (statement of Marybeth Peters, Register
of Copyrights); see id. at 157 (statement of David Nimmer, counsel,
United States Telephone Association) (“The courts’ divergent
interpretations of Section 506(a) yield uncertainty . . . . Congress should
specify that ‘willful’ . . . requires a specific intent to violate a known legal
duty.”); see also id. at 37 (statement of Brad Smith, Associate General
Counsel, Microsoft Corp.) (“[W]e are only talking about willful
infringement of a copyright holder’s rights. . . . [U]nder criminal law a
willful act requires that it be intentionally done with knowledge that it was
prohibited by law.”).
16 UNITED STATES V. LIU
respect to protectable expression, if the defendant did not
copy as a factual matter, but instead independently created the
work at issue, then infringement liability must be denied.”
(quoting 4 Nimmer, supra, § 13.01[B]) (internal quotation
mark omitted)). To infringe a copyright, one must copy the
protected work. See, e.g., L.A. Printex Indus., Inc. v.
Aeropostale, Inc., 676 F.3d 841, 846 (9th Cir. 2012) (“To
establish copyright infringement, a plaintiff must prove two
elements: ‘(1) ownership of a valid copyright, and (2)
copying of constituent elements of the work that are
original.’” (quoting Feist Publ’ns, Inc. v. Rural Tel. Serv. Co.,
499 U.S. 340, 361 (1991))). Copying is of necessity an
intentional act. If we were to read 17 U.S.C. § 506(a)’s
willfulness requirement to mean only an intent to copy, there
would be no meaningful distinction between civil and
criminal liability in the vast majority of cases. That cannot be
the result that Congress sought.
In the present case, notwithstanding the parties’
agreement to add an instruction that “[e]vidence of
reproduction or distribution of a copyrighted work, by itself,
shall not be sufficient to establish willful infringement of a
copyright,” 17 U.S.C. § 506(a)(2), the district court did not
include the requested language. In fact, the district court
exacerbated the omission by defining willful infringement
without the crucial knowledge component:
In order for the defendant to be found
guilty of [copyright infringement], the
government must prove each of the following
elements beyond a reasonable doubt:
First, that on a date beginning in 2001 and
continuing to on or about July 31, 2003, in the
UNITED STATES V. LIU 17
Northern District of California, defendant
willfully infringed, that is, without
authorization, duplicated, reproduced, or sold
compact disks that infringed the copyright
belonging to the owners of the works . . . .
By defining “willfully infringed” without any requirement
that the defendant knew he was committing copyright
infringement, the district court instructed the jury to apply a
civil liability standard.
The district court further compounded this error a short
time later, instructing the jury that “[a]n act is done ‘willfully’
if the act is done knowingly and intentionally, not through
ignorance, mistake, or accident.” We recently considered a
virtually identical instruction in United States v. Berry,
683 F.3d 1015 (9th Cir. 2012). The district court had
instructed the jury that “an act is done willfully if the
defendant acted or failed to act knowingly and intentionally
and did not act or fail to act through ignorance, mistake, or
accident.” Id. at 1021. Finding error, we explained that “the
instruction given merged the concepts of ‘knowing’ and
‘willful’ without conveying the culpable state of mind that the
term ‘willfully’ is designed to invoke in the criminal arena.”
Id. (citing Bryan, 524 U.S. at 192).
We conclude that the district court in this case erred by
defining willfulness such that the jury could have convicted
Liu without finding that he knew that his actions were
unlawful.
18 UNITED STATES V. LIU
C. The Instructional Error Was Not Harmless
Liu’s convictions on the copyright infringement counts
cannot stand unless the instructional error was harmless. “An
error in describing an element of the offense in a jury
instruction is harmless only if it is ‘clear beyond a reasonable
doubt that a rational jury would have found the defendant
guilty absent the error.’” Munguia, 704 F.3d at 603–04
(quoting Neder v. United States, 527 U.S. 1, 18 (1999)).
The conclusion was irresistible that the infringing CDs
and DVDs were replicated in the Super DVD warehouse.
The discs all were found there with the exception of the
Norton Anti-Virus software, which was discovered at the
Vertex warehouse along with purchase orders and shipping
labels linking it to Liu and Super DVD. Almost all of the
music CDs bore Liu’s initials, “JL.” Liu admitted to
reproducing the Crouching Tiger DVDs for R&E Trading,
and there was a written agreement from early 2001 between
Super DVD and R&E to press 2,000 copies of the Beatles
CD. Although Liu claimed to have no knowledge of how the
other discs were made, suggesting that the orders may have
been handled by his sales staff, it is unclear whether the jury
disbelieved him, thought he had forgotten, or found his
employees’ acts attributable to him.5
5
While criminal liability for copyright infringement cannot lie purely on
the basis of respondeat superior, we note in passing that the district court
could have given the jury clearer guidance on this issue. It instructed only
that “[a]n individual is liable for willful infringement even if the conduct
on which you base your finding of wilful infringement is performed as a
representative of a corporation.”
UNITED STATES V. LIU 19
Whatever the case, Liu’s state of mind was critical. Liu
was aware of copyright laws and admittedly had been sued
for copyright infringement in the past. His guilt thus hinged
on whether he knew that his clients did not have authorization
to replicate the disks at issue.
Liu presented evidence that his customers signed
agreements stating that they had the copyright to the works in
question and promising “to be responsible for all copyright
related legal responsibilities.” His expert witness testified
that other replicators also rely on such agreements rather than
carefully investigate each customer. Liu testified that he
attempted to verify that there were no copyright violations on
the Latin music compilations by listening to the some of the
tracks and satisfying himself that it was Valdez’s voice. He
further claimed that he did not realize R&E’s order for
Crouching Tiger DVDs was unauthorized until he became
embroiled in the payment dispute, at which time he filed a
lawsuit against R&E. The fact that he initiated a lawsuit over
a dispute involving thousands of infringing copies of
Crouching Tiger, Hidden Dragon that he created is arguably
compelling evidence that he did not understand his conduct
to have been wrongful.
We cannot say that the jury would not have credited some
or all of this evidence had the jury appreciated its relevance.
The evidence may have supported a finding that Liu did not
know that he was illegally copying copyrighted material and
thus he did not willfully infringe the copyrights. Therefore,
the failure to provide a proper willfulness instruction was not
harmless beyond a reasonable doubt.
We reject the government’s contention that any error was
harmless because, on the second day of trial, the district court
20 UNITED STATES V. LIU
correctly described the concept of willfulness to the jury. The
court stated that “one of the issues in this case [is that] the
government claims that Mr. Liu did certain conduct willfully,
which means that he did it intentionally, that he knew what
was going on and he knew that it was a violation of
someone’s rights under the copyright laws, or he had good
reason to know that.” But this statement is itself problematic.
Having “good reason to know” one is violating the law is not
tantamount to knowing it.
Even if the court’s statement accurately conveyed the
willfulness standard to the jury, a correct statement of the law
given during trial does not cure an incorrect one delivered
immediately prior to deliberations. See Seltzer v. Chesley,
512 F.2d 1030, 1035 (9th Cir. 1975) (“Erroneous instructions
can be corrected by the trial judge only by expressly
correcting them and by directing the members of the jury to
expunge the erroneous statements from their minds.”); cf.
Petrocelli v. Angelone, 248 F.3d 877, 888–89 (9th Cir. 2001)
(finding that court’s improper statement of the law during
trial did not violate due process “because the trial judge used
the correct instruction at the end of trial and because the
correct instruction was the only instruction given to the jury
to take with them to the jury room” (quoting Guam v.
Ignacio, 852 F.2d 459, 461 (9th Cir. 1988)) (internal
quotation marks and brackets omitted)).
Further, the district court’s statement about willfulness
was made in a context that had nothing to do with the
elements of criminal copyright infringement. The court was
in the middle of delivering unrelated comments about
character evidence. It immediately minimized the need for
the jury to pay attention to its comments, adding that “[t]hose
are all things I’ll tell you about when I give you my
UNITED STATES V. LIU 21
instructions on the law.” Thus, it is inconceivable that the
district court’s partially correct statement on willfulness
mid-trial overcame the effect of its erroneous statements in
the oral and written jury instructions given to the jury
immediately prior to deliberations.
Accordingly, we vacate Liu’s convictions and sentence
for criminal copyright infringement on counts one through
three and remand to the district court. For reasons we will
explain, count two must be dismissed.
D. The “Knowingly” Element of Trafficking in
Counterfeit Labels Requires Knowledge that the
Items Are Counterfeit
Liu also challenges the jury instructions on the fourth
count for trafficking in counterfeit labels. That offense
requires proof that the defendant acted “knowingly.”
18 U.S.C. § 2318(a)(1). Like “willfully,” the word
“knowingly” is susceptible to more than one meaning in this
context. It could mean either that the defendant knew that he
was trafficking or that he knew that the labels were
counterfeit. We hold that “knowingly” in this context means
the latter, and thus the government must prove that Liu knew
the labels were counterfeit.
The original statute required that the defendant act both
“knowingly and with fraudulent intent” and, further, that he
act “knowing the label to have been falsely made, forged, or
counterfeited.” Act of Oct. 9, 1962, Pub. L. 87-773, § 1, 76
Stat. 775. The statutory language changed to its current
form—omitting all of these requirements except that the
defendant act “knowingly”—in the Piracy and Counterfeiting
Amendments Act of 1982, Pub. L. 97-180, § 2, 96 Stat. 91.
22 UNITED STATES V. LIU
The Senate report makes clear that this change was not
intended to be substantive because the omitted language was
viewed as superfluous:
[T]he proposed section 2318 eliminates the
requirement of fraudulent intent. Instead, it
would be sufficient if the offense of
trafficking in counterfeit labels were
“knowingly” committed. The Department of
Justice testified before the Committee [on the
Judiciary] that dropping the fraudulent intent
requirement would present no problem,
essentially agreeing with the Committee’s
view that the fraudulent intent requirement is
superfluous if one is acting with the
knowledge that the articles are counterfeit. In
other words, it would be difficult to conceive
of a situation in which one could traffic in
articles knowing that they are counterfeit
without intending to defraud the purchaser.
S. Rep. No. 97-274, pt. 5, at 8–9 (1981), reprinted in 1982
U.S.C.C.A.N. 127, 134–35. Thus, it is clear that Congress
used “knowingly” to refer to knowledge that the labels were
counterfeit.
The district court instructed the jury that it could convict
Liu on count four only upon a finding that he “knowingly
trafficked in counterfeit labels affixed or designing to be
affixed to copies of a copyrighted computer software product
called ‘Norton Anti-Virus 2003’ belonging to Symantec
Corporation.” The court then defined “knowingly,” taking its
instruction from Ninth Circuit Model Criminal Jury
Instruction 5.6, including the optional second sentence:
UNITED STATES V. LIU 23
“[A]n act is done ‘knowingly’ if the defendant is aware of the
act and does not act through ignorance, mistake, or accident.
The government is not required to prove that the defendant
knew that his act was unlawful” (emphasis added).
The comment to the model instruction recognizes that
some offenses require proof that the defendant knew his
conduct was unlawful, citing United States v. Santillan,
243 F.3d 1125, 1129 (9th Cir. 2001), and United States v.
Turman, 122 F.3d 1167, 1169 (9th Cir. 1997), abrogated on
other grounds by Henderson v. United States, 133 S. Ct. 1121(2013).6
Turman is analogous to the circumstances here. In that
case, the district court instructed on money laundering, which
requires knowledge that the laundered funds were derived
from wire fraud but not necessarily knowledge that the
defendant knew money laundering itself was illegal.
122 F.3d at 1169. The court informed the jury that to reach
a guilty verdict it must find that the defendant “knowingly
engaged or attempted to engage in a monetary transaction
which [he] knew involved criminally derived property.” Id.The district court reiterated the point, stating that “[t]he
government must prove beyond a reasonable doubt that the
6
Turman held that the trial court erred in failing to require proof that the
defendant knew his conduct was illegal. Despite recognizing the error, we
found that the error was not plain because the law was unsettled when the
instructions were given and “an error is not plain unless it would have
been obvious to a reasonably competent district judge at the time of trial.”
122 F.3d at 1171. The Supreme Court recently rejected this reasoning in
Henderson, holding that “whether a legal question was settled or unsettled
at the time of trial, it is enough that an error be ‘plain’ at the time of
appellate consideration” to warrant reversal. 133 S. Ct. at 1130 (internal
quotation marks omitted).
24 UNITED STATES V. LIU
Defendant knew that the monetary transaction involved
criminally derived property.” Id.But even the unambiguous instruction in Turman about
what the defendant needed to know did not immunize the
process from error, because the district court went on to give
the same instruction that was given here—that the
government need not prove that the defendant knew his act
was unlawful. See 122 F.3d at 1169. Although the defendant
had not objected to this instruction, we pointed out that it
constituted error under United States v. Stein, 37 F.3d 1407,
1410 (9th Cir. 1994). Turman, 122 F.3d at 1169. Stein
reversed the money laundering convictions of another
defendant whose jury had received similar instructions
because “a broad, general definition of ‘knowingly’ might be
interpreted to allow conviction even where the defendant did
not know the laundered funds were illegally obtained.”
Turman, 122 F.3d at 1169 (construing Stein).
In this case, the instructions regarding knowledge were
even more problematic than in Turman and Stein because the
district court never clarified what Liu needed to know, i.e.,
that the labels were counterfeit. The district court merely
stated that Liu must have “knowingly trafficked in counterfeit
labels.” This instruction was at best ambiguous as to whether
Liu needed to know that the labels were counterfeit or merely
needed to know that he trafficked in labels that later turned
out to be counterfeit—a strict liability standard.
Accordingly, we hold that the district court erred in its
instruction on knowledge—both because the court failed to
clarify that “knowingly” referred to knowledge that the labels
were counterfeit and because it supplied the confusingly
UNITED STATES V. LIU 25
broad statement about the government not needing to prove
knowledge that we rejected in Turman and Stein.
This jury instructional error was not harmless beyond a
reasonable doubt for the same reasons that the willfulness
instruction was not harmless. There was evidence that Liu
did not know that the Norton Anti-Virus disks were
unauthorized which, if accepted by the jury, may have
resulted in a different outcome. We therefore vacate Liu’s
conviction and sentence on count four and remand to the
district court.
II. Liu’s Ineffective Assistance of Counsel Claims
Liu asserts that he received ineffective assistance of
counsel because his trial attorney failed to argue that the
alleged copyright infringement violations in counts one and
two were barred by the five-year statute of limitations,
17 U.S.C. § 507(a). As a general rule, we do not review
challenges to the effectiveness of defense counsel on direct
appeal. United States v. Rahman, 642 F.3d 1257, 1260 (9th
Cir. 2011) (citing United States v. Jeronimo, 398 F.3d 1149,
1155 (9th Cir. 2005)). The only exceptions are when “the
record on appeal is sufficiently developed to permit
determination of the issue,” or “the legal representation is so
inadequate that it obviously denies a defendant his Sixth
Amendment right to counsel.” Id. (citing Jeronimo, 398 F.3d
at 1156). Review, when warranted, is de novo. United States
v. Benford, 574 F.3d 1228 (9th Cir. 2009) (citing United
States v. Benlian, 63 F.3d 824, 826 & n.3 (9th Cir. 1995)).
26 UNITED STATES V. LIU
A. Factual Background
On November 29, 2006, the grand jury returned the
original indictment, which contained an allegation that Liu
committed criminal copyright infringement (count one) and
trafficked in counterfeit labels (count two). It alleged that
Super DVD reproduced more than 11,000 CDs containing
copyrighted music and more than 50,000 CDs containing
copyrighted software programs. The first count alleged that
on or about July 31, 2003, Liu willfully infringed the
copyrights of copyrighted music and software including, but
not limited to, 36 musical tracks and two Norton Anti-Virus
2003 software programs. The second count alleged that
beginning on an unknown date and continuing until about
May 12, 2003, Liu knowingly trafficked in counterfeit labels
for two Symantec programs.
On March 12, 2008, the grand jury returned the first
superseding indictment, which consisted of two counts of
criminal copyright infringement, one count of trafficking in
counterfeit labels, and one count of criminal forfeiture and
destruction, 18 U.S.C. §§ 506(b), 509(a). The first count
alleged that beginning on an unknown date and continuing
until on or about July 31, 2003, Liu willfully infringed
copyrighted music works, including but not limited to 51
musical tracks. The second count alleged that beginning on
an unknown date and continuing until about May 2003, Liu
willfully infringed the copyrights of two Symantec antivirus
programs. The third count alleged that beginning on an
unknown date and continuing until about May 2003, Liu
knowingly trafficked in counterfeit labels for the two
Symantec programs.
UNITED STATES V. LIU 27
Lastly, on February 17, 2010, the grand jury returned the
second superseding indictment, which consisted of three
counts of criminal copyright infringement and one count of
trafficking in counterfeit labels. Counts one, three, and four
approximately corresponded to counts one, two, and three in
the first superseding indictment. Count two alleged that
beginning on an unknown date in 2001 and continuing until
about July 31, 2003, Liu willfully infringed copyrighted
music works, including but not limited to Crouching Tiger,
Hidden Dragon. This was the first time that Crouching
Tiger, Hidden Dragon appeared in an indictment. At trial,
the district court corrected the second superseding indictment
so that in the second count “music” was replaced by “motion
picture.”
B. Whether the Statute of Limitations Was Tolled
“Generally speaking, the return of an indictment tolls the
statute of limitations with respect to the charges contained in
the indictment.” United States v. Pacheco, 912 F.2d 297, 305
(9th Cir. 1990) (citing United States v. Italiano, 894 F.2d
1280, 1282 (11th Cir. 1990); United States v. Sears, Roebuck
& Co., 785 F.2d 777, 778 (9th Cir. 1986)). Tolling continues
when a superseding indictment on the same charges is
returned while a previous indictment is still pending. Id.(citing Italiano, 894 F.2d at 1282).
“[I]f the counts in the superseding indictment
‘broaden[ed] or substantially amend[ed]’ the charges in the
original indictment, the statute of limitations would not have
been tolled as to those charges.” Id. (alteration in original)
(quoting Sears, 785 F.2d at 778–79). In contrast, “where the
counts of an original indictment are simply duplicated
verbatim into a superseding indictment, the statute of
28 UNITED STATES V. LIU
limitations on those counts is tolled, even if additional counts
that are subject to no limitations objection are added.” Id.(citing United States v. Jones, 816 F.2d 1483, 1487 (10th Cir.
1987); Sears, 785 F.2d at 779).
“To determine whether a superseding indictment
substantially broadens or amends a pending timely
indictment, . . . it is appropriate to consider ‘whether the
additional pleadings allege violations of a different statute,
contain different elements, rely on different evidence, or
expose the defendant to a potentially greater sentence.’”
United States v. Yielding, 657 F.3d 688, 704 (8th Cir. 2011)
(quoting United States v. Salmonese, 352 F.3d 608, 622
(2d Cir. 2003)). The central concern in determining whether
the counts in a superseding indictment should be tolled based
on similar counts included in the earlier indictment is notice.
“If the allegations and charges are substantially the same in
the old and new indictments, the assumption is that the
defendant has been placed on notice of the charges against
him. That is, he knows that he will be called to account for
certain activities and should prepare a defense.” Pacheco,
912 F.2d at 305 (citing Italiano, 894 F.2d at 1283).
1. Count One
With respect to count one, Liu claims that by alleging
additional music tracks in each successive indictment, the
government broadened the scope of the conduct at issue. The
factual record before us is inadequate, however, to address
the merits of this contention. It is unclear, for example,
whether and when Liu was on notice of the entire catalogue
of works recovered from the Super DVD warehouse such that
once he was accused of infringing certain music CDs he
would fairly be on notice that others might be added to the
UNITED STATES V. LIU 29
list. Therefore, we decline to address whether Liu’s counsel
was ineffective for failing to assert a statute-of-limitations
defense to count one.
2. Count Two
As to count two, Liu asserts that he lacked notice that
Crouching Tiger, Hidden Dragon would be at issue until
more than five years after the alleged infringement. This
issue can be resolved on the current record given that it turns
largely on the language of the indictments rather than on
factual matters. We therefore proceed to address it.
We agree with Liu that he had no notice whatsoever that
he should prepare to be prosecuted for willfully infringing a
motion picture work until the second superseding indictment.
He was alleged to have infringed it between 2001 and 2003,
but the second superseding indictment was not returned until
2010. The delay in bringing this charge is longer than the law
permits. See 17 U.S.C. § 507(a).
The government argues that the addition of the Crouching
Tiger, Hidden Dragon allegation “did not meaningfully
broaden the scope of the original indictment” because the
original indictment “allude[d]” to the infringement of movies.
The government is referring to the forfeiture allegation at the
end of the original indictment that would have required Liu
to
forfeit . . . all copies, manufactured,
reproduced, distributed, sold, or otherwise
used, intended for use, or possessed with
intent to use in violation of the offense under
Section 506(a), and all plates, molds,
30 UNITED STATES V. LIU
matrices, masters, tapes, film negatives, or
other articles by means of which such copies
may be reproduced, and all electronic,
mechanical, and other devices for
manufacturing, reproducing, and assembling
such copies, including but not limited to the
items listed below:
(1) ODME replication machine—Serial
Number 98017, Unit Code CDR 2010/00
Manufacture Year 1998; and
(2) Hanky Printer—Serial Number
AA-72B1R, Model Number CD-300
(emphasis added).
The inclusion of the word “film negatives” in the middle of
boilerplate forfeiture language is not nearly enough to have
put Liu on notice that he was to be subject to copyright
infringement charges involving motion pictures.
The government also insists that “there is no material
difference between music and movies for the infringement
charged in this case” because “both types of infringement
required the same kind of equipment and resulted in digital
copies pressed on discs.” Assuming that the government’s
factual premise is true—the record is ambiguous—its
relevance is unclear. Liu took orders from several different
clients. The Crouching Tiger order was a distinct transaction
from the ones at issue in the original indictment. Liu might
have used his equipment to commit any number of similar but
unconnected crimes. If he had done so and the government
intended to prosecute him for one of those crimes, it had until
UNITED STATES V. LIU 31
the relevant statute of limitations ran out to charge him.
Here, it did not.
Plainly, count two of the second superseding indictment
was not subject to tolling. Because the alleged conduct
occurred more than five years earlier, this count was
time-barred. We can think of no legitimate reason for Liu’s
trial counsel not to have raised the obvious statute-of-
limitations defense, and Liu was unquestionably prejudiced
by the result—he was convicted. Consequently, Liu’s
counsel was constitutionally ineffective under Strickland v.
Washington, 466 U.S. 668 (1984).
We have already vacated Liu’s conviction and sentence
on count two based on the inadequate willfulness instruction.
Given that this count is time-barred, we see no reason the
government should be allowed to retry him on it. On remand,
the district court should dismiss count two.
CONCLUSION
We vacate Liu’s convictions and sentences for criminal
copyright infringement and trafficking in counterfeit labels.7
7
As to counts one and two, Liu challenges the district court’s
calculations of the infringement amount and the quantity of infringing
works. We find no error. By default, the infringement amount is
calculated as the number of infringing copies multiplied by the retail value
of the infringing work. United States Sentencing Guidelines § 2B5.3, cmt.
2(B). In certain enumerated circumstances, such as the case here, when
the infringing item “is a digital or electronic reproduction of the infringed
item,” the infringement amount is instead calculated as the number of
infringing copies multiplied by the retail value of the infringed work. Id.
§ 2B5.3, cmt. 2(A)(i)(II). Thus, the district court appropriately valued the
CDs and DVDs at the retail price of the infringed works. With regard to
32 UNITED STATES V. LIU
We need not address the remaining issues raised on appeal
and remand this matter to the district court for further
proceedings consistent with this opinion.
VACATED and REMANDED with instructions.
the number of infringing works, in the absence of any evidence suggesting
that particular purchase orders found at the Vertex warehouse overstated
the quantity of software produced, the court was entitled to rely on the
number of sales they reflected. As to the infringing discs found at the
Super DVD warehouse, the court’s calculation of the number of infringing
works was supported by both the Super DVD documents and the actual
CDs and DVDs.