United States v. Liu

Ninth Circuit panel vacates defendant’s convictions for criminal copyright infringement and trafficking in counterfeit labels, holding that district court failed to properly instruct jury that, under 17 U.S.C. § 506(a), defendant needed to know he was committing an unlawful act, and that, under 18 U.S.C. § 2318(a)(1), defendant needed to know that trafficked labels were counterfeit.

Defendant Liu founded and was the CEO of a DVD-manufacturing company called Super DVD. After a private investigator noticed unlicensed copies of software bearing counterfeit labels in Super DVD’s warehouse, the government obtained a search warrant and executed a search. The government found thousands of CDs and DVDs, including copies of musical compilation CDs and the film Crouching Tiger, Hidden Dragon. Liu did not have authorization from the relevant copyright holders to replicate these works.

The government charged Liu with criminal copyright infringement under 17 U.S.C. §506(a)(1)(A) and 18 U.S.C. §2319(b)(1) and with criminal trafficking of counterfeit labels under 18 U.S.C. §2318(a). After a jury trial, Liu was convicted on all counts and sentenced to four years in prison. Liu appealed, arguing that the district court gave improper jury instructions as to the “willfulness” element of criminal copyright infringement and the “knowledge” element of trafficking in counterfeit labels. The Ninth Circuit agreed, vacating the convictions and remanding.

Surveying precedent and legislative history, the Ninth Circuit held that “willful” infringement, as that term is used in 17 U.S.C. §506(a), requires a voluntary, intentional violation of a known legal duty. The district court’s instruction omitted that specific knowledge component, allowing the jury to convict Liu without finding that he deliberately engaged in copyright infringement. The Ninth Circuit also held that 18 U.S.C. §2318(a)(1) requires proof that the defendant knew that the trafficked labels were, in fact, counterfeit. The district court’s instruction was ambiguous and deficient in failing to clarify what exactly Liu needed to know when he “knowingly trafficked in counterfeit labels.” Because Liu’s guilt under both statutes depended on the extent of his knowledge, and because he had proffered some evidence that, if credited by the jury, might have resulted in an acquittal under the proper instructions, the Ninth Circuit concluded that the errors were not harmless.

Additionally, Liu raised an ineffective assistance of counsel claim on appeal, asserting that his attorney had failed to raise objections to certain matters in the indictment that should have been subject to a statute of limitations defense. Although the panel noted that it normally would not entertain such challenges on direct appeal, the panel found that one of the counts (count two) against Liu was time-barred and that competent counsel would have raised an objection. Having already vacated all counts, the panel instructed the district court to dismiss count two on remand.

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