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IP/Entertainment Case Law Updates

United States v. Armstead

Defendant David Armstead was charged with and convicted of two felony counts of willful copyright infringement for the distribution of bootleg DVDs. For a felony conviction, the criminal copyright infringement statute, 18 U.S.C. § 2319(b)(1), requires that the defendant distribute at least ten unauthorized copies on each occasion which have a “total retail value of more than $2,500.” Defendant had sold the DVDs at issue to an undercover agent for $500 in the first transaction and for $1,000 in the second. The only issue at trial and on appeal was how to measure the “retail value” of DVDs sold by the defendant to an undercover agent. The “retail value” of the DVDs would be determinative of whether Armstead would be convicted of a felony or misdemeanor.

Armstead argued that he should only have been convicted of a misdemeanor because “retail value” should be the price a willing buyer would pay a willing seller at the time and in the market in which the infringing DVDs were sold – i.e., the thieves’ market. In other words, the bootleg value or the exact price paid by the undercover agent in the transactions, which was less than $2,500 per transaction in this case. The government argued that “retail value” refers to the higher of what a willing buyer would pay a willing seller for legitimate copies of the DVDs. The government had put on evidence that the prerelease value was at least $1,000 per DVD, that average retail price was higher than $19.00 per DVD and that the suggested retail price was at least $25.00 per DVD.

Stating that it was a “matter of first impression,” the Fourth Circuit held that “’retail value’ as used in 18. U.S.C. § 2319(b)(1) refers to the value of copies of the copyrighted material at the time the defendant committed the violation and sold the copies and that the retail value is determined by taking the highest of the ‘face value,’ ‘par value,’ or ‘market value’ of copies and the copyrighted material in a retail context.” The court stated that this definition includes, but is not limited to, the bootleg value. Since, the jury had sufficient evidence from which to conclude that the total retail value of the DVDs exceeded the $2500 threshold, the court upheld defendant’s felony conviction.